President Joe Biden introduced his social benefits proposal, The American Families Plan, in a joint session to Congress this week. Many of the pledges included extending benefits that have been given as part of the Covid-19 relief stimulus package. Others focus on educational improvements and nutrition credits to cover wider swaths of young children. The estimated to cost for the plan is vast, more than $2 trillion, with expenditures coming on top of the infrastructure proposal introduced earlier this year.
The proposal has been met with criticism by some for its expense and the involvement the government will have in people’s lives as a result of benefits given. It will have to go through Congressional approval before becoming law.
Earned Income Tax Credit
The earned income tax credit would subsidize low-income working families by crediting an “amount that is equal to a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum,” according to the White House. The IRS upped the amounts a person can receive this year in accordance with the Covid-19 relief package and Biden proposed to extend it in his speech earlier this week.
Child and Dependent Care Tax Credit
Enacted as part of the stimulus relief bill, Biden is proposing to extend the child and dependent care tax credit. He proposed that families receive a tax credit for as much as half of their spending on qualified child care for children under age 13, up to a total of $4,000 for one child or $8,000 for two or more children. Additionally, a 50% reimbursement will be available to families making less than $125,000 a year, while families making between $125,000 and $400,000 will receive a partial credit with benefits at least as generous as those they receive today, according to the White House. The credit can be used for expenses ranging from full-time care to after school and summer care, according to the White House. Biden’s plan calls on Congress to make this credit permanent.
$80 Billion Investment in Pell Grants
Pell Grants are government subsidies for education given to low-income students. It is need-based financial aid that does not to be repaid, and Biden asked for an additional $80 billion in funding for the program.
Additional Assistance Through Pell Grants
Biden noted that Pell Grant awards used to cover around 80% of education costs for a four-year education but in recent years that number has plummeted to around 30%. In order to improve disbursement, Biden is pledging to increase the award amount by $14,000 per student.
Money for Student Retention and Completion Rates
On top of increasing available Pell Grant money, Biden has also asked for $62 billion to be invested in completion and retention rates at community colleges that serve students from disadvantaged communities. He proposed the amount after claiming that “simply giving access to postsecondary education is not enough.”
In addition, he suggests providing services “including wraparound services ranging from child care and mental health services to faculty and peer mentoring; emergency basic needs grants; practices that recruit and retain diverse faculty; transfer agreements between colleges; and evidence-based remediation programs.”
$46 Billion Investment in HBCUs, TCUs and MSIs
Biden stated that the American Families Plan will invest in making college more affordable for low-to-middle income students paying special attention to students at historically Black colleges and universities, tribal colleges and universities and Hispanic-serving institutions. Asian American, Native American Pacific Islander and other minority-serving institutions would also be included. This will be executed through a $46 billion investment and will provide two years of subsidized tuition and expand programs in high demand fields at these universities. Of this money, $39 billion will provide two years subsidized tuition for students whose families earn less than $125,000 enrolled for four years in one of these universities.
$9 Billion For Teachers
Alongside money for diverse institutions is an investment of $9 billion to train, equip and diversify American teachers to better prepare high school graduates for the real world. The president claims that an investment like this would actually help the U.S. boost earnings and increase employment opportunities in the long-term.
Tuition-Free Community College
Buried in the plan is the White House’s proposal to invest $109 billion into two years of community college so Americans can get their diploma or certificate.
Another $109 billion will be pledged for providing two years of community college free of charge for every American. Biden stated this would be so that every U.S. citizen has the chance to obtain a degree or certificate.
Free Community College for Dreamers
Part of the plan to provide free community college is making the education available to Dreamers – school-aged immigrants that are in the U.S. illegally after being brought here by their parents – as well. Biden states he is doing this so that first-time students and workers wanting to reskill can enroll in a community college to earn a degree or credential for free. He also details that the benefit can be used over three years and up to four years if warranted.
Free Preschool For All 3-and 4-Year-Olds
Citing research that states pre-school attendance rates show to increase graduation and labor participation rates, Biden also proposed offering free universal pre-school. Free pre-school would be available to all 3-and 4-year-olds with a $200 billion investment.
Pre-K Employees to Receive $15 Per Hour
While a minimum wage increase is on the table in general, Biden is also proposing giving $15 an hour to all employees in pre-K and Head Start programs. In addition, educators will receive job-embedded coaching, professional development and wage that reflect the importance of their work, according to the White House.
Double Scholarships For Future Teachers
Biden is calling on Congress to double the amount of scholarship money paid to teachers from $4,000 to $8,000 per year while earning their degree. This would not only strengthen the program, but expand it to early childhood educators as well.
Grow Your Own Teacher Programs
$2.8 billion will be invested in Grow Your Own programs and year-long paid teacher residency programs. These programs have a greater impact on student outcomes, teacher retention and are more likely to enroll teacher candidates of color according to the White House. $400 million will be invested towards teacher preparations at HBCUs, TCUs and MSIs.
Special Education Teachers
Included in teacher preparation enhancements is $900 million for the development of special education teachers. Biden stresses that teachers are eager to “answer the call” for areas of teaching that need help, but are often deterred by the high cost of programs. This relief is designed to alleviate some of those pressures.
Educator Continued Education
Through the plan, $1.6 billion would be invested to provide educators with the opportunity to obtain additional certifications in high-demand areas. These include special education, bilingual education and certifications that improve teacher performance.
Teachers as Leaders
$2 billion will be invested in programs to position teachers as leaders and mentors in their school buildings. These include creating mentorship programs “with teachers at the forefront” and compensating teachers for this kind of work to incentivize participation.
Building a Pipeline Of Skilled Healthcare Workers
$2 billion will be directed toward building a pipeline of skilled health care workers with graduate degrees at BCUs, TCUs and MSIs. Specifically, this will be for creating or financing programs in fields like STEM, computer science, nursing and allied health, according to the White House.
Lower Prescription Drug Costs
Long an area of contention, the U.S. is one of the countries paying the highest prices in the world for prescription medications. Biden proposed to “give Medicare the power to save hundreds of billions of dollars by negotiating lower prices for prescription drugs.” He went on to say that it wouldn’t just help those on Medicare, but would lower prescription drug costs for everyone.
Affordable Family Care
$225 billion will be invested to make child care affordable, with special attention to families most in need. For families in the lowest income brackets, child care costs for young children would be fully covered, and “families earning 1.5 times their state median income would pay no more than 7% of their income in child care costs,” the White House reported. The program would provide an array of options for childcare centers, public school and Early Head Start programs.
Paid Family Leave
An estimated $225 billion of the monies allotted would be used to provide workers up to $4,000 a month with a minimum of two-thirds of average weekly wages replaced, rising to 80% for the lowest wage workers, Biden stated. It will guarantee twelve weeks of paid leave by year 10 of the program, including three bereavement days per year starting in the first year. Reasons for taking the leave can include taking care of a child, spouse or parent, dealing with a loved one’s military deployment or a variety of other reasons.
Summer EBT Credits
Many students across America currently use EBT credits as their main source of food throughout the day. When school is out for the summer, that source of food is on pause as well. Biden is proposing to invest $45 billion to expand summer EBT credits to all eligible children nationwide. $25 billion of this would be towards making the program permanent.
Community Eligibility Provision
Through the proposed plan $17 billion would be invested to expand free meals for children in the highest poverty level districts. Currently, only about 70% of eligible schools utilize CEP — many because they do not know about the application process and others because the stigma surrounding its participation deters people from taking part. Some parents in high poverty level schools also make just enough money to not qualify for the free meals but are still struggling. This investment would lower the CEP threshold to provide more.
Healthy Foods Incentive Demonstration
$1 billion will be pledged to support schools that are expanding healthy food offerings. The White House clarifies this means that if a school is already making specific efforts to introduce healthy foods that exceed current meal standards, it will receive enhanced reimbursements.
SNAP for the Formerly Incarcerated
SNAP nutrition benefits are currently not available for formerly incarcerated individuals who were convicted of a drug-related felony. The Biden administration is proposing to re-entry for these individuals into the SNAP program and slid this into the AFP. They argue many of these individuals are parents to small children and the denial of benefits ultimately trickles down to them.
Passing the Paycheck Fairness Act
Biden mentioned working towards equal pay for women through the Paycheck Fairness Act. The bill, introduced this year, would address wage discrimination on the basis of sex, which is defined “to include pregnancy, sexual orientation, gender identity and sex characteristics.”
Specifically, it limits an employer’s ability to claim that a pay differential is based on a factor other than sex, enhances nonretaliation prohibitions and makes it illegal to require an employee to sign a contract or waiver prohibiting the employee from disclosing information about the employer’s wages, the bill states. It also increases civil penalties for violations of equal pay provisions. Biden stated, “Let’s get the Paycheck Fairness Act to my desk for equal pay. It’s long past time.”
Earned Income Tax Credit Expansion For Childless Workers
Before 2020, Biden claimed that low-wage childless workers were “taxed into poverty” or deeper into poverty. The AFP will triple these credits for childless workers — to the benefit of 17 million low-wage employees. He proposed increasing this credit to more than $1,100 per worker and is calling on Congress to make this credit permanent.
Extend ACA Premium Tax Credits
The president stated his ambitions to keep the temporarily lowered health care premiums for 9 million Americans covered under the ACA permanent. He stated the pandemic highlighted how necessary lower deductibles are and is now pushing to keep them in place. As it currently stands, the premiums are slated to increase. This would save families an average of $50 per person per month. Making these premium reductions permanent would be a $200 billion investment.
Permanent Refundability of the Child Tax Credit
The Child Tax Credit as it stands now is not permanent, and Biden is pushing for it to last through 2025. While the president intends to make this credit permanent one day, the American Families Plan would make permanent only the full refundability of the child tax credit right now.
IRS Authority to Regulate Tax Preparers
Currently, if you have someone prepare your taxes for you, the IRS is not regulating how they do their job all that much. Biden claims that tax returns prepared by certain preparers have high error rates, while charging high fees and exposing taxpayers to costly audits. He is also calling for allowing the IRS to have some sort of regulatory authority over these preparers.
Top Rate Tax Hike
Among the more controversial items in Biden’s agenda is raising the top income tax bracket from 37% – where it is currently – to 39.6%. This accounts for people making roughly over $400,000 per year or the wealthiest 1% of Americans.
An End to Capital Income Tax Breaks
Biden is proposing that households making over $1 million pay the same 39.6% tax rate on ALL of their income — including investments. Currently, some Americans make a considerable amount of money in capital gains through hefty investments, but only pay around 20% on that income instead of it being taxed at the rate their normal income would be. Biden is seeking to end this and tax it as regular income.
Close Carried Interest Loophole
Hedge fund managers and private equity shops currently receive a lot of their income from a loophole called carried interest. It allows them to receive profits on a share of the fund’s overall profits, whether or not they contribute to the overall fund. A source of failed bipartisan efforts for decades to eliminate, Biden is now making his push to close the loophole as well.
Increased Spending on Research and Development
Biden claimed in his speech that, in the past, 2% of our nation’s GDP was spent on research and development. Today, he added, we spend less than 1%. He highlighted that China and other countries “are closing in fast.” He stressed that “we have to develop and dominate the products and technologies of the future: advanced batteries, biotechnology, computer chips and clean energy.” His comments come on the heels of recent controversy surrounding the computer chip shortage.
This $2 trillion social package is among the most expensive in recent history. Will it be worth it? Take our poll.
More From GOBankingRates
- Money’s Most Influential: Where Do Americans Get Their Financial Advice?
- Don’t Miss Out on Nominating Your Favorite Small Business To Be Featured on GOBankingRates — Ends May 31
- ‘Rich Dad Poor Dad’ Author Robert Kiyosaki: You Should Never Say ‘I Can’t Afford That’
- Everything You Need To Know About Taxes This Year