Democrats in Congress continue to eye a substantial, near universal child benefit, delivered as an expanded child tax credit (CTC). Significant barriers remain to its enactment, but its proposed changes illustrate the power of federal investment in families.
Sen. Michael Bennet (D-CO) and Rep. Rosa DeLauro (D-CT) have reintroduced the American Family Act (AFA), which builds on temporary changes to the CTC in effect in 2021. Nearly every Democrat in both houses of Congress has cosponsored the legislation.
TPC estimates that, as under current law, nearly 90 percent of families with children would receive the CTC under the AFA. But a larger share of the lowest-income families would benefit (Figure 1).
What would the American Family Act do?
Like the 2021 CTC, the AFA would transform the credit into a near universal monthly child benefit. Credit amounts would be larger than in 2021, accounting for inflation since then.
As in 2021, eligible low- and moderate-income families would receive a larger benefit for children under 6. Under the AFA, these families would also receive a “baby bonus” for children under 1, which would increase their annual credit. In 2026, the maximum AFA credit a family could receive each year would be:
- $6,360 for a child under 1 year old;
- $4,320 for a child 1-5 years old; and
- $3,600 for a child 6-17 years old.
These amounts would be annually adjusted for inflation.
All low- and moderate-income families could receive the maximum amount of the credit because the credit would be fully refundable rather than phasing in with earnings.
Currently, about one-third of children live in families that receive less than the full credit because their parents do not earn enough and owe sufficient taxes to be eligible for the maximum credit.
For higher-income families, the credit would initially phase down to $2,000 per child—less than the $2,200 per child credit many receive now. Once income exceeded $300,000 for single taxpayers and $400,000 for married couples filing jointly, the credit would begin to phase down until it reached zero.
As in 2021, benefits from the AFA credit would be paid out monthly, in advance of filing a tax return. A taxpayer with one child between 6 and 17 years old, for example, could receive up to $300 per month.
The bill would also create new eligibility rules. Under current law, eligibility is determined annually and taxpayers can generally claim a close family relative (like a son/daughter, grandchild, niece/nephew, or sibling) who has lived with them for more than half the year for the credit. But under the AFA, eligibility would be determined monthly based on who lived with and cared for the child for most of that month.
What impacts would the American Family Act have?
The biggest benefits would go to families with the lowest income. Average benefits for families with children would increase by almost $2,500 per year. The lowest-income families would see their average credit more than triple under the AFA from $1,660 to $5,470 (Figure 2).
Other considerations
Some commentators have expressed concern that a universal benefit would result in many people stopping work. Others have balked at its cost. TPC estimates that the AFA would cost about $1.4 trillion over 10 years (FY2026-FY2035).
Both issues may have thwarted extension of the 2021 CTC expansion. The bill’s new eligibility rules that offer a more flexible definition of caregiving could also add complexity, making it harder for some taxpayers to comply with the rules and make administration of the credit more difficult for the IRS.
But a substantial body of research suggests that the policy’s effect on work would be modest. And budget scoring rules do not account for the long-term value of investing in children.
The expanded 2021 CTC lifted 2.9 million children out of poverty, with corresponding reductions in food insecurity, financial hardship, and income inequality. Columbia University estimates that if the AFA had been in place in 2024, the CTC would have lifted 3.3 million children out of poverty.
