"The reforms to the Child Tax Credit (CTC) under the Biden administration (which they hope to make permanent) substantially improve upon the previous CTC by removing its work-conditioning and increasing its generosity. But the choice to leave the benefit as a tax credit administered by the IRS and to continue the practice of upfront means-testing prevents this reform from being truly great. Individuals will have to apply to the IRS for the benefit through tax filings or through a web portal and submit to income verification.
Already the IRS estimates that roughly 8 to 9 percent of eligible families will not receive the benefit; the IRS does not have previous tax filings from them and they may not be aware they must take action to benefit. Administering this program through the IRS raises additional challenges. For one, the IRS does not have extensive experience issuing regular monthly payments. Further, the complexity of the US tax system has led (though not inevitably) to the creation of for-profit tax filing companies that extract a substantial portion of any refund or credit issued from the numerous working class households that rely on them for help.
It is useful to contrast this with Senator Mitt Romney’s alternative proposal for a child allowance, which does away with the CTC and instead replaces it with a monthly benefit administered by the Social Security Administration, which has a long history of managing monthly payments to tens of millions of households. Though the SSA would also initially require additional data to launch the program, the plan consists of automatic payments with no need to apply annually. Each household would also receive the full benefit monthly with any “means-testing” being done on the back end at tax time."