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Senate passes $3K child tax credit for 2021

Yahoo Finance’s Myles Udland, Brian Sozzi, Julie Hyman, and Rick Newman break down what to expect from the U.S. Covid relief bill.

Video Transcript

MYLES UDLAND: Late Friday, we got news that we would indeed see the $1.9 trillion stimulus bill likely passed, Senate passing. Version goes now to the House and likely then to the desk of President Joe Biden. Rick Newman joins us now to talk about what the end of this saga, the likely end, I should say, Rick, of this saga, means for consumers. First of all, I think everyone wants to know when they're going to get their checks. And also just sort of where economists see it going from here.

We talked for months and months and months about would it be 1.2 trillion, 1.4, 900 billion. And ultimately, we got the full Monty.

RICK NEWMAN: Yeah. And it's no surprise that Congress has passed this bill. I think it is a surprise that the Senate left it as large as $1.9 trillion. There was an expectation that maybe it would get down to, like, 1.5 trillion or 1.6. But the Senate left almost everything in there. They trimmed the unemployment number from $400 a week to $300. But those checks are going to start popping up in people's bank accounts, deposited electronically pretty soon after Congress passes this bill.

The House is probably going to approve it tomorrow. So those checks are going to start appearing pretty soon. And this is a significant amount of money. So it's $1,400 per person. For a family of four, that means you're going to get $5,600, $5,600 in your bank account. That ain't nothing.

JULIE HYMAN: Definitely, it's not nothing. And I want to talk specifically, especially again since it's International Women's Day, about that child tax credit, which, if you are a single mother, for example, who's really been hit by this pandemic-- and we know women have disproportionately to men-- this could be something that could be particularly helpful. It's also something that reportedly the Dems are going to try to extend beyond just this year.

RICK NEWMAN: Yeah. This is a big deal, even though it's kind of come in under the radar. So this is an existing tax credit. But this bill will expand it and change it. So it used to be a $2,000 tax credit that you would claim as an offset against your taxes when you find your tax return the following year. So it would be kind of a delayed benefit and only if you paid taxes.

Congress is changing that. They're raising it from $2,000 per child to $3,000 for kids six and over and then 3,600 for kids under six. And another big change is, instead of waiting till the following year, the Treasury Department is actually going to just send out the amount that you are due on a monthly basis. And it's now what is called a refundable tax credit, which means that you get it whether you pay tax or not.

So for everybody who qualifies, you're going to get $360 per child under six and then $300 per child six and over for one year. So that adds up to some significant money. And this is going to help people at the bottom of the income chain, people who aren't even earning enough income to pay taxes.

And as you pointed out, Julie, it's a one-year plan. But I think this is a test to see is this politically popular enough that Democrats could possibly make this permanent in some fashion next year.

MYLES UDLAND: And, you know, Rick, I wanted to just finally ask about that idea of what endures after this. And I know that you and I have discussed this over the last year. To me, it seems clear that sending Americans money-- which, by the way, this isn't the first time that we've done it. It's just the first time we've sent three rounds of checks within 12 months. It seems like it's not really something politicians can start to talk down in future downturns, right? 2/3 of people approvingly say of sending out checks. How are you thinking about the implications of what the next round of fiscal stimulus looks like based on what got through and how popular various provisions of these bills were?

RICK NEWMAN: You're right that we've sent out checks before but never on this scale. So in this year alone-- and there were checks that went out last year. In this year alone, many families are going to get more than 10,000, Myles, of basically free money from the government. And that is targeted at the bottom of the K-shaped recovery we've been talking about, the lower leg, the people who are not really recovering so much.

So I don't think we're going to have sustained $1,400 checks going out every year. But at the lower end, I think that tax credit is something-- that child tax credit is something that probably makes pretty good economic sense. And I think Democrats might see if they can make that permanent.

Of course, this is going to depend largely on who controls Congress after 2022. So Congress might be able to-- the Democrat-controlled Congress next year might be able to make that permanent. If Republicans can take control of Congress, you can see them reversing that because that's what happens with tax policy. But we're definitely experimenting with some things that are close to becoming universal basic income, not the $1,000 or $1,200 we heard from Andrew Yang earlier per person per month, but smaller amounts that might be more politically plausible.

MYLES UDLAND: All right, Yahoo Finance's Rick Newman with the latest on what to expect in that latest stimulus package. Again, we expect it to be passed by the House tomorrow and then head to the president's desk sometime this--

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