In late April, President Biden announced the American Families Plan, which aims to help families and children through $1.8 trillion in investments and tax credits over the next 10 years. Among other things, the American Families Plan proposes to expand Affordable Care Act (ACA) premium subsidies, implement a federal paid family and medical leave program, extend tax credits passed under the American Rescue Plan Act (ARPA), and provide 2 years of of free preschool and 2 years of community college.
The Biden Administration plans to pay for the American Families Plan by closing tax loopholes and increasing the top tax rate from 37% to 39.6% for those earning over $452,700 for single and head of household filers and over $509,300 for joint filers. It is important to note that the American Families Plan does not garner bipartisan support in Congress, so it is unclear whether the plan (or even a scaled back version of the plan) will pass through Congress.
The American Families Plan (“Plan’”) proposes the following:
Creating a federal paid family and medical leave program: The Plan proposes to create a comprehensive federal paid family and medical leave program (“Program”), which will provide partial wage replacement to take time to bond with a new child, care for a seriously ill loved one, deal with a loved one’s military deployment, find safety from sexual assault, stalking, or domestic violence, heal from one’s own serious illness, or take time to deal with the death of a loved one. Though many states and localities require employers to provide paid family and medical leave to covered employees, no such paid leave requirement exists under federal law.
The Program would guarantee 12 weeks of paid parental, family, and personal illness and safe leave by year 10 of the Program and would ensure 3 days of bereavement leave starting in the first year of the Program. The Program would provide workers with up to $4,000 per month, with a minimum of two-thirds (2/3) of average weekly wage replacement (and 80% for low wage workers).
Further, the Plan calls on Congress to pass the Healthy Families Act, which will allow workers to accrue 7 days of paid sick leave per year to seek preventative care for themselves or their family (e.g., getting a flu short, recovering from short-term illness, or caring for a sick child or family member or family member with disability-related needs).
Extending the expanded ACA premium tax credits passed under ARPA: For 2021 and 2022, ARPA expanded eligibility for ACA premium subsidies to higher-income individuals making over 400% of the federal poverty level (previously, only individuals making between 100% and 400% of the federal poverty level qualified for subsidies) and increased the amount of financial assistance to lower-income individuals who already qualified for subsidies (individuals earning between 100% and 150% of the federal poverty level can receive fully subsidized coverage for a silver benchmark plan).
The Plan proposes to make the ARPA expansions permanent. The Plan projects this tax credit will lower health insurance costs by an average of $50 per month for 9 million people and will enable 4 million uninsured people to gain coverage.
Extending the ARPA Child Tax Credit (CTC) through 2025: Prior to ARPA, eligible parents could receive a partially refundable tax credit up to $2,000 for each dependent child under the age of 17. For 2021 only, ARPA expanded the CTC to $3,000 per child aged 6 to 17 years old (including 17-year-olds), and to $3,600 per child aged 5 or younger, and made the CTC fully refundable. The Plan proposes to extend the ARPA expansion through 2025, make the credit fully refundable permanently, and provide the credit throughout the year.
Making the ARPA Child and Dependent Care Credit (CDCTC) expansion permanent: Prior to ARPA, eligible families could receive a nonrefundable tax credit of up to 35% of qualified dependent care expenses (up to $3,000 for one child/dependent and $6,000 for two children/dependents in total expenses) for children under the age of 13 and dependents physically or mentally incapable of self-care. For 2021 only,ARPA expanded the CDCTC percentage to 50% of qualified expenses (up to $8,000 for one child/dependent or $16,000 for two or more children/dependents in total expenses) and made the credit fully refundable. The Plan proposes to make the ARPA expansion permanent.
On April 27, 2021, Congressman Richard Neal introduced the Building an Economy for Families Act, which proposes similar initiatives as the American Families Plan, including universal paid family and medical leave, guaranteed access to child care, and permanently extending the family-related tax credits from ARPA. Though it is unclear whether Congressman Neal’s bill has a chance to pass Congress, it does signal that these issues will continue to be on the agenda of the Biden Administration and the current Congress.