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April 28, 2021

Biden administration outlines $1.8 trillion American Families Plan

This morning (April 28), the White House outlined their $1.8 trillion American Families Plan, which President Biden will lay out in more detail tonight during his first address to a joint session of Congress. The plan calls for $1 trillion in investments and $800 billion in tax cuts directed at American families and workers, as well as tax code reforms focused on high-income Americans, estimated to raise about $1.5 trillion over a decade. According to the Fact Sheet, when combined with the American Jobs Plan, all of the investments would be fully paid for over the next 15 years.

In a background press call on the plan, a senior administration official said Biden’s plan “is about cutting taxes for middle-class families, for childcare, for healthcare, and for families. And he believes that we should do that in a fiscally responsible way, first and foremost, by making sure the wealthiest Americans actually pay the taxes they already owe.”

The plan proposes investments of over $500 billion in early childhood and postsecondary education, $225 billion to address child care affordability and workforce sustainability, $225 billion to create a national paid leave program, $45 billion for nutrition programs, and extensions of enhanced tax credits included in the American Rescue Plan including those for Affordable Care Act (ACA) premium tax credits and the Child Tax Credit (CTC), Child and Dependent Care Tax Credit (CDCTC) and Earned Income Tax Credit (EITC). The plan also proposes paying for the investments in part through increasing the top marginal tax rate to 39.6% and ending a variety of other tax breaks and “loopholes” for high-income Americans while promising that no one making $400,000 per year or less will see their taxes go up.

Notably absent from the plan are proposals to tackle drug prices and enhance coverage through Medicare and Medicaid expansions, despite pressure from Congressional Democrats to include additional health priorities. Senior White House officials said in a briefing call that while not included in the current proposal, the President “remains fully committed to negotiations to reduce prescription drug prices” and hinted that revenue generated from such a future proposal could be used in “expanding the benefits of Medicare itself.” The Fact Sheet also notes that “President Biden has a plan to build on the Affordable Care Act and lower prescription drug costs for everyone by letting Medicare negotiate prices… creating a public option and the option for people to enroll in Medicare at age 60, and closing the Medicaid coverage gap to help millions of Americans gain health insurance.”

Additional detail, by topic area, is outlined below:


  • Free, universal preschool for three- and four-year olds ($200b)
  • Two years of free community college ($109b)
  • Increase of maximum Pell Grant awards ($85b)
  • Practices to increase college retention and completion ($62b)
  • Investments in Historically Black Colleges and Universities (HBCUs), Tribal Colleges and Universities (TCUs), and Minority Serving Institutions (MSIs) ($46b)
  • Teacher education, preparation, and diversification initiatives ($9b)

Childcare ($225b)

  • Direct support to low-and middle-income families so they will pay no more than 7% of their income on childcare for children under five-years-old
  • Funding for childcare providers to enable high-quality, accessible, and inclusive care
  • $15 minimum wage for early childhood staff, along with professional development and training

Paid family and medical leave ($225b)

  • Create a national paid family and medical leave program, guaranteeing 12 weeks of paid parental, family, and personal illness/safe leave by year 10 of the program and provide three days of bereavement leave per year starting in year one

Nutrition ($45b)

  • Expand summer Electronic Benefit Transfer (EBT), used to issue Supplemental Nutrition Assistance Program (SNAP) benefits, to all eligible children nationwide (>$25b)
  • Expand free meals for children in the highest poverty districts ($17b)
  • Launch a healthy foods incentive demonstration ($1b)
  • Facilitate re-entry for formerly incarcerated individuals through SNAP Eligibility

Unemployment Insurance (UI) Program ($45b)

  • Work with Congress to reform unemployment insurance to automatically adjust the length and amount of UI benefits unemployed workers receive depending on economic conditions

ACA premium tax credits ($200b)

  • Make permanent the enhanced ACA premium tax credits included in the American Rescue Plan, which ensure no one pays more than 8.5% of their income

Other tax credits extensions

  • Extend Child Tax Credit (CTC) increases in the American Rescue Plan through 2025 and make it permanently fully refundable
  • Make permanent the temporary Child and Dependent Care Tax Credit (CDCTC) expansion, enabling families to receive a tax credit for as much as half of their spending on qualified childcare
  • Make the Earned Income Tax Credit Expansion (EITC) for childless workers permanent, which roughly tripled the EITC for childless workers

Tax reform

  • Increase investment in IRS enforcement, focused on large corporations, businesses, and estates, and higher-income individuals (estimated to raise $700b over 10 years)
  • Increase the top marginal tax rate to 39.6% from 37%
  • End capital income tax breaks and other “loopholes,” including for households making over $1 million, making the capital gains rate 39.6%; ending the practice of “stepping up,” the basis for capital gains in excess of $1 million; closing the carried interest loophole; ending the special real estate tax break; and ensuring all high-income Americans pay a 3.8% Medicare tax on all their earnings

The fact sheet is available here.


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   • Any member of the group, at (202) 293-7474.