President Joe Biden announced on Wednesday, after 100 days in office, the American Families Plan, a transfer program that seeks to allocate funds to guarantee free education, increase transfers to community colleges and expand tax credit coverage for childless families and workers.
The American Families Plan seeks to allocate nearly $200 billion to guarantee free preschool education for children ages 3 to 4. For this, Biden will seek a partnership with the states.
Also, 109 billion will be injected into community colleges. Money will be allocated to provide two years of free college to anyone with the ability to apply to college.
The families plan will also allocate $80 billion to expand the federal Pell Grant program, which is intended for undergraduate students with low financial ability to finance their high school education.
In addition to Pell Grants, the Families Plan will allocate nearly $62 billion to community colleges and other educational institutions serving low-income populations to prevent dropouts and increase retention rates in these communities.
Historically black colleges and universities, tribal colleges, and Hispanic, Asian, Native American and Pacific American colleges and universities will receive transfers of $46 billion.
Also, $9 billion will be earmarked to “diversify” the teaching force in the American education system. Within the plan, part of the community college investment will go “into tuition-free community scholarships for teachers and community colleges to support those who wish to earn a bachelor’s degree or other credential that supports their work as an educator or become an early childhood educator.” Any educator who exits this program will be guaranteed an entry-level wage of at least 15 an hour.
How would the expansion of tax credits in the American Families Plan work?
Biden’s families plan would raise the child tax credits for low-income families from 2,000 to 3,000, and to 3,600 for parents with children under 16 years old. The plan extends the credit to parents under 17. For low-income households with children ages 4 to 7, the tax credit extension will raise the transfers they receive from an average of 2,800 to 6,600.
Biden’s stimulus plan expanded this child tax credit, instituted during the plan of his predecessor, Donald Trump, by up to one year. Under the new bill, the credit would be expanded through 2025.
Low-income workers will also be able to receive tax credits. Those individuals without children with an income of less than 9 an hour may be subject to a tax refund of 1,100 at the end of the taxable year.
Benefits under the Affordable Care Act, also known as Obamacare, will be expanded under the American Families Plan. Biden’s stimulus plan reduced insurance rates for two years for more than 9 million people, under the new plan that reduction would be permanent, allocating more than $200 billion to fund the health insurance rate cuts.
How will Biden’s American Families Plan be funded?
The plan will be funded by increasing the marginal income tax rate for individuals with incomes above 523,600 and 628,300 for married couples (from 37% to 39.6%).
The administration also seeks to increase the capital gains tax from 23.8% to 43.4%. This increase includes an additional tax of 3.8%. According to the Democratic administration, the tax increase will affect only 0.3% of American households.