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• Democrats are drafting legislation to have the IRS send monthly payments of up to $300 to millions of families, sources told Insider.
• People could opt to receive a monthly check or a lump sum after filing taxes, according to an early version of the plan.
• Biden supported an identical measure during the presidential race, and Democrats are expected to lobby heavily for it.
• Visit Business Insider's homepage for more stories.

Democrats in Congress are drafting legislation to provide millions of American families with up to $300 in monthly cash payments, two Democratic sources familiar with the matter told Insider. The proposal could form part of Biden's federal rescue package, and Democrats are expected to lobby heavily for its inclusion.

A preliminary version of the plan would put the IRS in charge of distributing $300 monthly payments for each child younger than 6 and $250 each month for kids ages 6 to 17. It would amount to $3,600 yearly for younger kids and $3,000 for the older ones.

The plan would make the child tax credit 'fully refundable,' Nick Martin, a spokesperson for Democratic Rep. Suzan DelBene of Washington, who is involved in the negotiations, told Insider.

That means people could receive the complete payment regardless of what they owe in taxes - which is comparable to the administration of a child allowance that many Western nations already have in place.

Biden's $1.9 trillion rescue package included a provision to shore up the child tax credit to those same levels for a year. The Committee for a Responsible Federal Budget pegged the component's cost at $120 billion.

Qualifying families can already claim a $2,000 tax credit for kids under 17. The lowest-income Americans do not receive the full credit because their tax bill is too low, with payments capped at $1,400. It is also paid in a lump sum after people file their taxes.

The proposal is strongly modeled on the American Family Act, a bill that Sen. Michael Bennet of Colorado and Sen. Sherrod Brown of Ohio reintroduced in 2019. It has since garnered substantial Democratic support, including from Sen. Cory Booker of New Jersey and Vice President Kamala Harris while she served in the Senate.

'This is something that really unites the Democratic caucus, and everyone has the goal of reducing poverty,' Martin said.

Another Democratic aide granted anonymity because they were not authorized to speak publicly confirmed the plan, saying House Ways and Means Committee Chair Richard Neal and House Appropriations Committee Chair Rosa DeLauro were deeply involved in the attempt to boost the tax credit. The aide added that the plan was not finalized yet. DelBene and Delauro sponsored the House version of the AFA.

The Washington Post first reported the proposal, which is expected to determine eligibility based on prior-year income. Higher-income families are not expected to qualify, with a threshold similar to the one that applied to stimulus checks that millions of Americans received over the past year.

The benefit under the American Family Act would gradually begin decreasing for people earning more than $130,000 a year and couples making above $180,000.

An income level where payments start phasing out has not been determined, the Democratic aide told Insider. An online portal may be set up through the Treasury Department for families to manage their credit - and select whether they want a monthly payment or a lump sum during tax season.

That may take time to get up and running, and some experts like Matt Bruenig of the left-leaning People's Policy Project say it may be administratively difficult to pull off. During her confirmation hearing this month, Treasury Secretary Janet Yellen said of the payments that she 'would certainly explore with the IRS if it's possible to make these available in advance on a monthly basis.'

The president's plan did not specify whether the payments would be monthly, though Biden included the measure in his 2020 economic platform. Columbia University researchers said it could cut child poverty in half, and experts said it would lift millions of Black and Latino children out of poverty.

If the measure is enacted, Democrats are hoping political pressure builds to turn the temporary emergency initiative into an enduring federal program, particularly as families begin receiving the payments.

The Institute on Taxation and Economic Policy, a left-leaning think tank, released an analysis on Tuesday projecting that the poorest 20% of Americans - or those earning below $21,300 annually - would experience the largest benefit boost with an extra $4,570. The bottom 60% of Americans would receive $3,360 on average, the institute forecast.

According to the think tank, the benefit estimates for income groups include:

• Second 20% (incomes ranging from $21,300 to $39,800): $3,120
• Middle 20% (incomes ranging $39,800 to $65,000): $2,520

Expanding the child tax credit is an idea that garnered Republican support in the past. Sens. Mitt Romney and Mike Lee of Utah have pushed to bolster the credit. The 2017 Republican tax law also widened the program's reach to additional middle-income families.

It is unclear whether GOP senators would endorse a measure that sends monthly payments as part of a major reform of the child tax credit. Many are likely to be critical of the program's price tag.

Romney's office did not respond to a request for comment. Lee's office declined to comment. Nearly 48 million US households are expected to claim the credit this year, according to the Joint Committee on Taxation in Congress.

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