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Debate: Should Congress Renew Advance Payments of Child Tax Credits?

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In response to the COVID-19 pandemic, a law was passed midway through 2021 that allowed taxpayers to receive advance payments of their child tax credit for the 2021 tax year. Eligibility for those payments was based on 2020 tax information. Taxpayers received payments on a monthly basis rather than waiting to claim the child tax credit on their 2021 income tax return. 

After 2021, Congress allowed that advance payment system to expire — meaning that taxpayers must once again wait until they file their 2022 income tax return to receive child tax credit payments. Over the past months, proposals have been floated to reignite the advance payment system for qualified taxpayers.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether the advance payment system should be renewed for the second half of 2022 and beyond.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: While we’ve mostly returned to normal post-COVID, there’s no reason we shouldn’t learn from the systems we implemented in the wake of the pandemic. Advance payment of the child tax credit may have been a pandemic-related provision. However, those advance payments managed to pull many families out of poverty and allow parents to put food on the table. That’s a valuable benefit that we shouldn’t overlook, and we should continue with the advance payment system.

Byrnes: The system of providing advance monthly payments of the child tax credit was never meant to be permanent. Advance payment of 2021 credits was a pandemic-related solution to a specific problem: parents who were unable to make ends meet because they were unable to work due to COVID-19 restrictions. Now, we’re facing a labor shortage where many taxpayers might simply choose to rely on these and other government payments to stay home. Advance payments would only exacerbate that particularly difficult problem.

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Bloink: There’s no real reason to make parents wait to receive their benefits in a lump sum in the following year. In fact, that might encourage these parents to spend the funds on something other than caring for their children, as it’s simply lumped in with their tax refund. Separating these payments from that lump sum “earmarks” the funds for child care and alerts more parents to the true reason for the child tax credit.

Byrnes: In hindsight, we now know that many people received advance child tax credit payments who didn’t really deserve them, based on their income for 2020. So, in reality, these advance payments created an even bigger tax headache for those clients in the 2021 filing season.

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Bloink: Now that we actually have the systems in place to implement this program, it makes little sense to abandon it. We’ve dealt with the issue of issuing payments. We also know that the reconciliation process wasn’t as onerous as many might believe. Most advance payment recipients did in fact qualify for the child tax credit. We’ve done the legwork here in implementing the program, and it would be a waste to let it go by the wayside.

Byrnes: We need to be moving away from these pandemic-related assistance programs generally. We’re facing an inflation rate that’s unprecedented — and the most difficult labor market in recent memory. Allowing yet another form of government assistance to continue would only make matters worse for business owners who are struggling to attract and retain employees in today’s market.

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