What’s in Biden’s American Families Plan?

What's in Biden's American Families Plan?

What Is the American Families Plan?

Frequently described as an “ambitious” plan to reinvigorate American households, the American Families Plan is one part of the Biden administration’s larger economic recovery framework, “Build Back Better,” which the White House says will restore the middle class and help families make ends meet.

The $1.8 trillion families plan is the second part of the multi-trillion dollar investment proposal that also includes the American Jobs Plan, a large infrastructure investment proposal that was released at the end of March and is working its way through Congress.

The American Families Plan would offer $1 trillion in investments and $800 billion in tax cuts to American families and workers. In addition to other programs, it includes universal preschool, two years of free community college, paid family and medical leave, an extension of the Child Tax Credit as well as extensions for the Earned Income Credit, and the Child and Dependent Care Credit.

It would also extend provisions of the American Rescue Plan, the administration’s economic stimulus bill, such as expanded health insurance tax credits to provide premium relief.

Key Takeaways

  • The $1.8 trillion American Families Plan would offer universal prekindergarten, child care, paid family and medical leave, as well as other tax credits and incentives to assist families.
  • The plan is an attempt to lift up American families through investments in education, child care, healthcare, and other supports to grow and strengthen the American middle class.
  • The American Families Plan is part of the Biden administration’s larger economic recovery package, which also includes the American Jobs Plan and the American Rescue Plan.
  • The plan would be funded by increasing the top individual income tax rate for those making more than $400,000 annually and other tax increases on high earners.

Understanding the American Families Plan

While the American Jobs Plan focuses on infrastructure, construed much more widely than bridges and roads, the Families Plan focuses on steps that will support lower- and middle-income families and income-generating moves that increase taxes to fund these proposals.

Here are some elements of the plan:

Make It Easier to Break into and Stay in the Middle Class

According to the Democratic National Committee, the economic recovery aims to help the country bounce back from COVID-19, but also to build up a “fair return” that emphasizes equal opportunity. They go on to say, “President Biden believes this is no time to just build back to the way things were before, with the old economy’s structural weaknesses and inequalities still in place. This is the moment to reimagine and rebuild an American economy for our families and the next generation.”

In a speech about the American Jobs Plan that speaks to these ideas, President Biden said: “It’s time to build our economy from the bottom up and from the middle out, not the top down.” The American Families plan emphasizes “making it easier for American families to “break into the middle class and easier to stay in the middle class.”

Education. The details of the American Families Plan published by the administration on April 28 2021 include funding for expanding education in order to build up the workforce, especially $109 billion for free community college (which would also be available for those in the country under the Development, Relief, and Education for Alien Minors Act (DREAM)), an additional investment of approximately $85 billion in Pell Grants, and $200 billion for prekindergarten for all three and four-year-olds.

Additionally, it makes provisions for $62 billion of investments in “evidence-based strategies” to increase retention and completion rates in community colleges (which includes mental health, child care services, and mentoring), as well as $46 billion of investments in colleges that have historically served minorities, and $9 billion for training and diversifying American grade school teachers.

Family support. A further $17 billion would expand the school meals programs in high-poverty areas, and another $25 billion would be invested in expanding summer Electronic Benefit Transfer (EBT) programs nationwide, which makes subsidized or free meals available for low-income families during the summer. It would also remove the drug-related felony restriction for benefits from the Supplemental Nutrition Assistance Program (SNAP), which the administration says disproportionately harms Black communities due to sentencing disparities.

Workforce support. The plan also seeks to create a national comprehensive paid family and medical leave (PFML) program that would guarantee 12 weeks of paid leave. (Currently, only 9 states have—or will have—PFML.) Other notable aspects of the plan include subsidized child care along with investments in the care workforce—and enhanced Affordable Care Act subsidies. Also described by the plan: more tax credits for workers, extending the Child Tax Credit increase until 2025 (and making it permanently fully refundable), and reforms to the unemployment system.

Fund the Plan Through Higher Taxes for High-income Taxpayers

The funding for these infrastructure programs also represents a move away from the previous Trump administration, whose 2017 Tax Cuts and Jobs Act slashed corporate taxes and lowered individual taxes, as well as greatly increasing the estate tax exemption.

The Biden administration wants to fund the American Jobs Plan, which would invest about $2 trillion this decade, through its “Made In America” Corporate Tax Plan, which would increase taxes for large corporations.

Funding for the American Families Plan would come through increasing the top marginal tax rate for high-income individuals and families, returning it to its 39.6%, pre-2017 level, as well as raising the long-term capital gains rate for those earning over $1 million to 39.6% and instituting greater enforcement from the Internal Revenue Service.

It also proposes reform in estate taxes, including the “step up in basis” for gains in excess of $1 million. The carried interest loophole that benefits hedge-fund partners and the like-kind exchange real-estate tax break would also be eliminated under the plan.

What Is In the American Families Plan?

The American Families Plan includes guaranteed paid leave, an expansion of school meals, investments in the education sector, such as in the child workforce and higher education, and covers expenses related to child care.

What Is the Build Back Better Plan?

The Build Back Better Plan was a piece of legislation put forth by Biden that sought large-scale investments in social and environmental programs, along with infrastructure. Parts of the plan were signed into law, such as the American Rescue Plan Act of 20221, while other parts of the plan were moved into the Build Back Better Act. The Build Back Better Act was not passed but pared down in scope and eventually signed into law as the Inflation Reduction Act of 2022.

What Is in the Inflation Reduction Act of 2022?

The Inflation Reduction Act of 2022 focuses on improving climate change, manufacturing, healthcare costs, and the tax code.

The Bottom Line

The White House published the details of the American Families Plan on Wednesday, April 28, 2021, the morning of the day when President Biden introduced the plan in a speech to a joint session of the U.S. Congress.

In that speech, President Biden stressed the necessity of Build Back Better to retain American competitiveness in the world.

“I believe what I propose is fair, fiscally responsible, and it raises revenue to pay for the plans I have proposed and will create millions of jobs that will grow the economy and enhance our financial standing in the country,” he said.

The plan is expected to face a protracted legislative fight as it will likely receive less bipartisan support than either the not-yet-passed infrastructure component of the recovery plan or the previous $1.9 trillion American Rescue Plan. Republicans are telling reporters that they will “fiercely oppose” new spending and tax hikes.

Republicans are also working on their own $568 billion version of the infrastructure plan, which has a narrower definition of infrastructure and does not, for example, cover climate change, and it seeks to preserve the Tax Cuts and Jobs Act.

Legislative aides say that the Democrats plan to use reconciliation, which would allow for a simple majority vote in the Senate, to move Biden’s recovery plans through Congress, CNN has reported; however, it is still unclear which pieces of the American Families Plan will make it through to the final package.

Throughout 2021 and 2022, bits of the Families Plan were worked into other bills, but over the course of negotiations, all of its provisions were cut from the bill that did eventually pass, the Inflation Reduction Act.