Harris proposes $6,000 tax credit for parents of newborns. Here’s what you need to know.

Vice President Kamala Harris is unveiling her economic plans, which include a proposal to provide a $6,000 tax credit for parents of newborns and bringing back the pandemic-era expanded Child Tax Credit. These more generous tax credits have the potential to lift millions of children out of poverty and assist middle-class families with the financial burden of raising kids. However, the estimated 10-year cost of $1.6 trillion by the nonpartisan Tax Foundation raises concerns about the hefty price tag associated with the proposal.

On the other hand, Sen. JD Vance, the Republican vice-presidential nominee, has suggested boosting the Child Tax Credit to $5,000, which could potentially cost between $2 trillion to $3 trillion over the next decade, as estimated by the Committee for a Responsible Federal Budget. Currently, the Child Tax Credit stands at $2,000 per eligible child.

The competing proposals to enhance the Child Tax Credit come after the temporary expansion of the benefit during the pandemic, which provided up to $3,600 per child to eligible families. When this boost expired in 2022, many children fell back into poverty, prompting calls from child advocates for another expansion of the credit.

Both proposals have emerged following the failure of a recent bill in the Senate that would have modestly expanded the tax benefit due to Republican opposition. Marisa Calderon, CEO of Prosperity Now, lauded the big and bold proposals from both campaigns, emphasizing the potential to uplift low-income and middle-income families, but highlighted the importance of scrutinizing the details of the plans.

Harris’s plan targets families with newborns by proposing a $6,000 tax credit for their child’s first year. This approach acknowledges the significant costs that come with welcoming a new child into the family, such as expenses for diapers, clothes, and essential baby gear. Additionally, Harris aims to reintroduce the expanded Child Tax Credit for all other eligible families.

The expanded Child Tax Credit, effective in 2021, raised the benefit to $3,600 for children under six years old and $3,000 for older children. While specific eligibility guidelines for Harris’s proposal have not been disclosed, both the current and expanded versions of the Child Tax Credit have income thresholds for eligibility. In the current tax year, the credit phases out for single filers earning over $200,000 and married couples with incomes exceeding $400,000.

On the other hand, Vance advocates for expanding the Child Tax Credit without income limits, emphasizing the need for a universal pro-family approach. Despite concerns about the potential economic impact of the proposals, with suggestions of possible inflationary spending, experts note that increased money in consumers’ hands could lead to heightened demand and subsequent price pressures.

While the plans put forth by both Democrats and Republicans to boost the Child Tax Credit may have varying economic implications, the overarching goal remains to provide much-needed financial support to families, especially in the challenging realm of childcare costs and raising children in today’s economic landscape.