Everything You Need to Know About President Biden's $1.8 Trillion American Families Plan

Earlier this year, the White House passed President Joe Biden's $1.9 trillion American Rescue Plan, sending aid to those most significantly impacted by the coronavirus. This plan sent out approximately 161 million stimulus payments to individuals and families in financial need and established monthly child tax credit payments.
Despite this aid, the White House announced in April that more help would be on the way, in the form of the American Families Plan. Since that announcement, changes seem to happen daily. What exactly is in this $1.8 trillion proposal and how could it impact you? We’ll break Biden's plan for you below.

Biden’s American Families Plan: The Highlights

The American Families Plan is Democratic-backed and designed to strengthen the American middle class and help those still struggling from job loss or pay cuts get back on their feet. Aid will be specifically aimed at children and families.
Below are a few key highlights of this plan:
  • Free universal preschool
  • Free community college (two years worth of post-high school education)
  • Invest in teachers
  • Reduce the cost of child care
  • Provide paid leave for families
  • Decrease nutrition and food insecurity
  • Focus on unemployment reform
  • Provide tax cuts to low- and middle-income Americans
  • Reform the way the wealthy are taxed
Let’s dig in a little deeper to better understand each section, how much it will cost, and how the Biden administration plans to enact each part of this proposal.

1. Free Preschool Education

This plan will help parents better afford to send their children to quality preschool by ensuring there are free public preschool options available across the country. This $200 billion investment is expected to prioritize underserved areas, while still offering school choices. It’s expected to save the average American family $13,000.

How will it work?

President Biden plans to encourage states to become members of a national partnership for preschool for all 3- and 4-year-olds across the country to offer high-quality education at a fraction of the price families are paying for today. This would include small teacher-to-student ratios to ensure all children receive adequate attention and support
Part of this plan will be dependent on encouraging more community college students to go into child care and Pre-K fields, ensuring these instructors earn at least $15 per hour.

2. Free Community College Education

This part of the new administration’s plan will help graduating seniors better afford to attend college for free for two years, without worrying about being saddled with debt. This $109 billion plan would also allow adults looking to return to school or learn a new skill to enroll in the free community college program. DREAMers would also be included within this plan.

How will it work?

This free community college benefit would allow graduating seniors and adults returning to school to receive a two-year degree (or two years’ worth of full-time courses) for $0. This benefit would be allowed to be spread out to three or four years for students that are unable to attend full-time but still totally two years of free community college. If all states participate in the program, approximately 5.5 million students could pay no tuition to receive a degree.
In addition, this plan would call for an increase of $1,400 for the Pell Grant award, which has not been increased in recent years to keep up with the rising costs of tuition. Another $62 billion would also be spent to help colleges and universities create retention programs to help students (particularly low-income and underserved populations) receive the financial aid they need to obtain their degrees. Lastly, this plan would pour $44 billion into providing two years of subsidized tuition as well as expanding aid for high-demand programs at historically Black colleges and universities (HBCUs), tribal colleges and universities (TCUs), and minority-serving institutions (MSIs). This would apply to applicants whose families earn less than $125,000 per year.

3. Invest in Teachers

Washington's plan would also focus on investing in teachers, by improving training and supporting, addressing teacher shortages, and boosting diversity in the field. This $9 billion investment would aim to improve the quality of teachers while improving teacher retention rates.

How will it work?

The plan calls to address teacher shortages by doubling scholarship money for future teachers from $4,000 per year to $8,000. It also proposes spending $2.8 billion in Grow Your Own programs and residency programs which are designed to attract longer teacher retention and more teachers of color. $900 million will be spent on special education teacher development, $400 million on developing teachers at HBCUs, TCUs, and MSIs, and $1.6 billion to help teachers receive additional certifications in bilingual education, special education, and additional areas. Lastly, $2 billion will be spent on teacher leadership programs to strengthen new educational leaders, while compensating them for their work in these roles.

4. Reduce the Cost of Child Care

The American Rescue plan provided direct payments to families in the form of stimulus checks and tax credits, but this proposal aims to help low and middle-class families even more. It proposes aid to ensure families pay no more than 7 percent of their income on child care while ensuring access to high-quality child care facilities. This will allow more families, and women, in particular, to return to the workforce when they’re ready, if they choose to.

How will it work?

This $225 billion plan will save families $14,800 per year (on average) in child care costs by allowing families to pay for these costs on a sliding scale, based on their income levels. Families will have child care options to choose from, including family child care centers, child care facilities, and programs like Early Head Start. Part of this funding would also go towards improving child care centers to ensure low-income students are receiving high-quality child care. Boosting incentives for child care workers, while increasing pay, is also a part of this plan.

5. Provide Paid Leave for Families

The Biden Administration also plans to provide comprehensive paid family leave, in line with leave programs offered in other countries, so families can focus on their health and wellbeing without financial worry.

How will it work?

This plan calls for a national paid family and medical leave program that would ensure workers receive partial wages when taking leave to care for a new child or sick family member, when facing a military family member’s deployment, recovering from domestic violence or assault, recovering from a personal illness, or for bereavement. This program would cost $225 billion over ten years and would provide up to $4,000 a month in aid.

6. Decrease Nutrition Insecurity

Lastly, this portion of the proposal would expand nutrition assistance to families in need to help reduce and ultimately end child hunger. While nutrition and food security has been an issue in the US for decades, the pandemic has increased visibility into this serious problem. President Biden is calling to invest $45 billion to address the food crisis in this country.

How will it work?

This investment will start by expanding summer EBT (electronic benefit transfer) programs to reach all eligible children from low-income families. This would allow for free and reduced lunch programs year-round. It would also expand free meal options in schools through CEP (Community Eligibility Provision), particularly in areas where 40 percent or more of the student body receives SNAP (Supplemental Nutrition Assistance Program) benefits. A $1 billion investment would also be made into promoting more nutritious food offerings at schools. Lastly, this plan would allow re-entry for those leaving prisons back into SNAP programs.

7. Unemployment Reform

This part of the American Families Plan would focus on reforming the unemployment insurance program, which supported millions of Americans during the pandemic. This proposal would allow the President to work with Congress to adjust the amount of benefits Americans could receive in certain economic conditions. It would also address system upgrades and ensure equal access.

8. Extend Tax Cuts for Americans in Need

This part of President Biden’s new plan would extend the tax cuts lower and middle-class American workers and families received over the past year, including the Child Tax Credit, the Earned Income Tax Credit (EITC), and the Child and Dependent Care Tax Credit. Health insurance tax credits will also be expanded to lower the cost of health insurance through the Affordable Care Act (free marketplace) for lower and middle-class Americans.

How will it work?

This tax benefit would aim to make certain tax breaks (such as the health insurance premium reduction) permanent while making other child tax credits fully refundable. This plan would make tax breaks and reductions permanent for families who qualify. It would also call for tax preparer regulations to ensure Americans are not paying for mistakes made by services used to prepare their taxes.

9. Reform Taxes on the Wealthy

President Biden’s proposal calls for the wealthiest Americans to pay higher taxes, or more like all taxes owed, by eliminating several loopholes and tax breaks that allowed them to pay less. This proposal aims to focus on rebuilding the middle class by eliminating tax breaks on the wealthy. There are also proposed changes in tax rates for the wealthy.

How will it work?

This part of the plan would get rid of lower capital gains and dividend taxes for the wealthy while ensuring the IRS has the resources needed to collect taxes owed by the wealthiest Americans. It’s estimated that this plan could raise $700 billion in tax hikes over a decade.

Will the American Families Plan Pass in Congress?

To fund part of this proposal, the American Families Plan would reverse many of the key 2017 tax cuts made by President Trump during his first year in office. Congress is already torn on the proposal with Democrats wanting more health care benefits and Republicans like Senator Tim Scott of South Carolina openly denouncing the plan.
While it’s unclear where the plan stands right now, this plan will likely change and evolve if it makes it to the House or Senate, and Biden has announced tax increases will be part of the plan.

The bottom Line

The proposed American Families Plan is designed to help American workers and families better afford child care, education, nutrition, and paid leave. This plan would put social safety nets in place to protect Americans in times of economic uncertainty, while also ensuring the wealthiest of Americans are no longer allotted tax loopholes and reductions.
While some Democrats do not believe this plan is progressive enough, many Republicans have noted this proposal is too extreme, particularly after the $1.9 trillion American Rescue Plan.

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