How Would a Child Benefit Under the Family Security Act (FSA) 2.0 Compare to the Child Tax Credit?

How Would a Child Benefit Under the Family Security Act (FSA) 2.0 Compare to the Child Tax Credit?

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INSIGHTi

How Would a Child Benefit Under the Family
Security Act (FSA) 2.0 Compare to the Child
Tax Credit?
August 2, 2022
Recent reports suggest congressional interest in the creation of a child allowance, either by extending the
temporary 2021 changes to the child credit or by creating a new child benefit that would replace the child
credit. This Insight briefly compares the child benefit proposed by Senators Romney, Burr, and Daines as
part of the Family Security Act 2.0 (FSA 2.0) on June 15, 2022, with the child tax credit (including the
2021 expansion) in Table 1 and in Figure 1.
Under FSA 2.0, families with children would be eligible for a monthly cash benefit of up to $350 per
month for each young child (aged 0-5) and $250 per month for each older child (aged 6-17) for up to six
children. Pregnant families could receive an additional payment of $700 per month during the last four
months of pregnancy. This benefit would be a cash payment administered by the Social Security
Administration (SSA), and would replace the existing child tax credit administered by the Internal
Revenue Service (IRS). For the lowest-income families, the benefit would phase in with the first dollar of
income, with a faster phase-in rate for families with more and/or younger children. For the highest-
income families, the benefit amount would phase out, similar to the current child tax credit.
Limitations With This Summary
FSA 2.0 has been released as a summary proposal, without introduction (as yet) of bill text. Hence, some
details of how the proposed child benefit would affect families are not available and this Insight, which is
based solely on information contained in the summary, cannot provide a comprehensive overview of the
proposal.
Other Policy Changes Made by the Proposal
In addition to creating a child benefit, FSA 2.0 would also modify other tax provisions for families which
are beyond the scope of this Insight. These changes include eliminating the head of household (HOH)
filing status for single parents and single taxpayers with adult dependents; modifying the EITC to create
one formula for those with children and one formula for families without children; and modifying the
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CRS INSIGHT
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child and dependent care credit so that it is limited to adult dependents. The proposal would also eliminate
the state and local tax (SALT) deduction.
Advocates for FSA 2.0 argue that it would simplify many of the child benefits in the tax code into one
transparent cash benefit, reducing child poverty by almost 13%. Others find that when taken as a whole—
including the modifications to other family tax benefits—some low-income families would be worse off
under FSA 2.0 than under current law, primarily due to the changes in the EITC and elimination of the
HOH filing status.

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Figure 1. Stylized Examples of Annual Child Benefit Amounts

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Source: CRS analysis of Internal Revenue Code Section 24 and the Family Security Act 2.0 summary as released on June
15, 2022.
Notes: These are stylized examples assuming 2022 income tax parameters are in effect and families have relatively simple
tax situations (e.g., they claim the standard deduction).
Table 1. Selected Parameters of the Child Benefit Under the Family Security Act 2.0
Proposal Released June 15, 2022, and the Current Law Child Tax Credit

CURRENT LAWa

2021
2022-2025
Expanded
Expanded
After 2025
Credit
Credit
(Permanent
PROPOSED UNDER
Parameter
(ARPA)
(TCJA)
Law)
Family Security Act 2.0
Maximum
$3,600 per
$2,000 per
$1,000 per
$4,200 per child 0-5 years oldb
Annual
child 0-5 years
child 0-16
child 0-16

Amount per
old
years old
years old
Child

$3,000 per
$3,000 per child 6-17 years old
child 6-17

years old
Maximum
$300 per
N/A. No monthly payment of
$350 per young child
Monthly
young child
credit, only annual payment.

Amount per
Child
$250 per older
$250 per older child
child
Maximum
unlimited
6 children
Number of
Children for
Whom the
Benefit Can
Be Claimed

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CURRENT LAWa

2021
2022-2025
Expanded
Expanded
After 2025
Credit
Credit
(Permanent
PROPOSED UNDER
Parameter
(ARPA)
(TCJA)
Law)
Family Security Act 2.0
Annual
$3,600 per
Phased-in
Phased-in
Phased-in amount calculated based on
Benefit
child 0-5 years
amount
amount
earned income:d
Amount Low-
oldc
calculated
calculated

Income

based on
based on
Families Can
The benefit phases in proportionally
$3,000 per
earned
earned
Receive per
(ratably) to the maximum amount when
child 6-17
income:
income:
Child
earned income is between $0 and $10,000.
years oldc

In other words, the rate, unlike current
15% of earned
15% of earned
law, is not fixed in statute. Instead, under a
income above
income above
ratable structure, the benefit phases in
$2,500 not to
$3,000 not to
faster for families with more children, up to
exceed $1,400
exceed $1,000
the maximum of six children.
per child 0-16
per child 0-16

years old
years old
For example, if a family had:
one young child: phase-in rate = 42%;
one older child: the phase-in rate = 30%;
two young children: phase-in rate = 84%;
two older children: phase-in rate = 60%.

The $10,000 threshold would be adjusted
for inflation.
Phaseout
Initial
$400,000 MFJ
$110,000 MFJ
Same as current law for 2022-2025
Threshold(s)
Threshold
$200,000
$75,000 HOH
MFJ: married
(Phaseout of
HOH
$75,000 S
filing jointly
Increased
Credit)
$200,000 S
HOH: head of
household
$150,000 MFJ
S: single
$112,500
HOH
$75,000 S
Second
Threshold
(Phaseout of
Pre-ARPA
Credit)
$400,000 MFJ
$200,000
HOH
$200,000 S
ID
Work-authorized SSN
Any taxpayer
SSNe
Requirement
ID (SSN/ITIN/
of Qualifying
ATIN)
Child
ID
Any taxpayer ID (SSN/ITIN)
SSNe
Requirement
of Taxpayer

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CURRENT LAWa

2021
2022-2025
Expanded
Expanded
After 2025
Credit
Credit
(Permanent
PROPOSED UNDER
Parameter
(ARPA)
(TCJA)
Law)
Family Security Act 2.0
Maximum
17 years old
16 years old
17 years old
Qualifying
Child Age
Other
Residency: Child must live with the taxpayer for
Benefit recipient must be legal and physical
Qualifying
more than 6 months of the year.
custodial parent of the child.
Child Rules

Relationship: The child must be the taxpayer’s

child, grandchild (or great-grandchild), sibling,
niece/nephew, or foster child placed with the
taxpayer either by an authorized placement agency
or court order.
Method of
Up to 50%
No advance. Credit claimed on
Monthly payments, although recipients may
Receipt
advanced (IRS
tax return.
elect to receive as an annual payment.
advanced as 6
monthly
payments in
2021);
remainder
claimed on tax
return
Primary
IRS
SSA
Administering
Agency
Source: CRS analysis of Internal Revenue Code Section 24 and the Family Security Act 2.0 summary as released on June
15, 2022.
Notes:
a. The permanent law child tax credit was temporarily modified for 2018 through the end of 2025 by P.L. 115-97,
commonly referred to as the Tax Cuts and Jobs Act (TCJA). The tax credit was further temporarily modified for
2021 only by the American Rescue Plan Act (P.L. 117-2). See CRS Report R45124, The Child Tax Credit: Legislative
History.
b. An additional $2,800 may be received for the last four months of a pregnancy (i.e., $700 per month for four months).
c. This credit was ful y refundable, meaning eligible low- and moderate-income taxpayers could receive the “ful ” or
maximum credit amount, irrespective of their income.
d. Under the proposal, the income used to phase in the benefit would be prior-year income. The summary does not
address how the provision would be administered or any process for verifying earned income.
e. The proposal summary does not specify if the SSN must be a work-authorized SSN.

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Author Information

Margot L. Crandall-Hollick

Specialist in Public Finance

Disclaimer
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