In their new $1.9 trillion stimulus law, Democrats temporarily converted the current child tax credit into a larger “child allowance” payable to parents regardless of whether they work or pay taxes. This has triggered debate about whether the law revives welfare as we knew it before those benefits were conditioned a generation ago on parents’ participation in work or training. But the fine print of the law reveals that these new benefits would certainly flow where welfare checks never went before — to potentially millions of parents who don’t live with their children, who could keep thousands of dollars in erroneous payments each year.
The rules of the child allowance are seemingly straightforward. Children under six receive $3,600 per year, while older children receive $3,000. Monthly shares could start flowing in July and would be sent regardless of whether parents work or pay taxes — nominally provided a child lived with them for more than six months in the year.
But not every child lives with the same parent for the same amount of time from one year to the next, meaning some payments — including “advance” monthly payments starting this year — could flow to the wrong parent if the child’s living arrangements recently changed. To address this issue, the child allowance offers an unusual answer: Parents or other adults receiving payments in error — because the child was not living with them — may keep up to $2,000 in mispayments per child, provided their annual income falls below $40,000 for single taxpayers, or slightly higher for other households.
Read Full Article »