12 weeks of paid leave, free preschool: 5 ways Biden's American Families Plan could help parents

"American Families Plan addresses critical economic security issues, from child care to paid leave."

President Joe Biden addresses a joint session of Congress at the US Capitol in Washington, DC, on April 28, 2021.
Chip Somodevilla | AFP | Getty Images

President Joe Biden addressed lawmakers in a joint session of Congress on Wednesday, offering further details on the $1.8 trillion American Families Plan his administration had outlined on Wednesday morning. The bill addresses some of "the biggest challenges facing American families today," Biden told congressional leaders.

"Even before the pandemic, caregiving and family responsibilities have disproportionately fallen on women and mothers," says Lauren Bauer, a fellow at The Hamilton Project, later adding that the "American Families Plan addresses critical economic security issues – from child care to paid leave to nutrition assistance – that have held back women and families with children for too long."

Here are five ways Biden's plan could help American parents.

1. The expanded Child Tax Credit would continue

The American Rescue Plan, which Biden signed into law in March, included a Child Tax Credit that gives qualifying parents up to $3,600 per eligible child under 6 and up to $3,000 per child 6 years old or older. Parents can choose to receive payments in installments this year or get the full amount when they file their 2021 taxes in 2022.

The expanded credit represents a significant increase from the previous rules, which allowed parents to claim a maximum of $2,000 for children 16 years and younger. The American Rescue Plan also made the credit fully refundable, meaning parents can claim the full sum regardless of how much they ultimately owe in taxes.

While the Rescue Plan only supports the increased credit for one year, the American Families Plan would extend it through 2025. It would also make the credit fully refundable permanently.

The latter piece is important because it's "the way we can get benefits to very low-income families, including families who are not working," says Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center. "Those families get the full value of the credit."

2. The child-care tax credit would become permanent

The American Rescue Plan made changes to the Child and Dependent Care Tax Credit, which helps parents offset the cost of child care. Previously, the credit provided up to $3,000 for one child or $6,000 for two or more children. In 2021, it will provide $4,000 and $8,000, respectively.

The American Families Plan would make the changes to this credit permanent. Families making less than $125,000 per year would be entitled to the full credit, while families making between $125,000 and $400,000 would receive a partial credit.

3. Child-care costs would be partly or fully subsidized

Under the plan, families would pay child-care costs on a sliding scale. Costs for the "most hard-pressed working families" would be fully covered, according to the White House, and families earning 1.5 times the median income in their state would pay no more than 7% of their income for child care.

This would save the average family $14,800 per year on child care expenses, according to the White House.

Tax credits vs deductions: Here's the difference

Video by Stephen Parkhurst

4. Free preschool for 3- and 4-year-olds

The American Families Plan would allocate $200 billion for free universal preschool for all 3- and 4-year-olds. That could save families thousands of dollars: The median cost of day care and preschool in America is $8,320 per year, according to the Brookings Institution.

5. 12 weeks of paid family leave

The U.S. is the only OECD country that doesn't guarantee any paid time off for parents after a child's birth. The Family and Medical Leave Act of 1993, which offers 12 weeks of unpaid time off, only applies to workers at companies with 50 or more employees. As a result, less than 1 in 5 American workers, 19%, currently has access to paid family leave, according to the Brookings Institution.

The American Families Plan would include a provision guaranteeing 12 weeks of paid family or medical leave for all workers within 10 years. Workers would be eligible to receive up to $4,000 per month, replacing a minimum of two-thirds of their average weekly wages and up to 80% for the lowest-wage workers.

Details are still emerging, including those related to the eligibility of nongestational and adoptive parents to take the leave.

Combined, Biden's proposals could have a significant impact on future generations. "We know that when we provide income support, particularly to very young children, they see a lifetime of benefits," says Maag. "They're more likely to do well in school, they are more likely to graduate from college and graduate from high school, and they are more likely to get better-paying jobs."

More from Grow: