Look to a Baby Bonus in 2025

by David Jimenez

Few moments are both more uncertain and more exciting for parents than the first months of an infant’s life. As a household grows, new expenses — from baby formula to diapers — hit pocketbooks. Yet even as these costs increase for families, parents typically find themselves with fewer financial resources as they temporarily step back from employment — whether to recover from the immense demands of pregnancy and childbirth or to prioritize bonding with their newborn. Every family across the income ladder confronts the same financial puzzle as they start or expand: new and increasing costs, less income to tackle them.

To help shore up families during these critical months of their lives, the Niskanen Center has proposed that federal lawmakers craft a so-called “baby bonus” — a one-time benefit to be provided to families soon after a child’s birth. As we at the Niskanen Center wrote in a memo to Congress, a newborn credit “is a high-salience way to signal support for parenthood, assist parents who do not have access to either private or public paid leave options, and deliver resources to families when they need it most.”

Both Republicans and Democrats should see a “baby bonus” as a policy and victory that would translate their stated commitments to families into tangible legislative progress.

Since 2016, leaders like Senator Deb Fischer (R-NE), then Senator Marco Rubio (R-FL) and Representatives Stephanie Bice (R-OK) and Ashley Hinson (R-IA) have crafted creative proposals to support working families. Their policy focus on making family life and finances more secure would be advanced through proposals like a baby bonus.

Some lawmakers have looked skeptically on this policy approach — driven in part by good faith concerns over deficit spending — but a baby bonus would be relatively inexpensive. We estimate that a one-time $2,000 benefit per newborn would have ballpark costs of $70 billion over ten years. It is a great option for those who want to do right by new parents but are sensitive to fiscal constraints.

Recent policy announcements indicate an opportunity for savvy lawmakers. Retired Senator Mitt Romney (R-UT) unveiled the Family Security Act. Endorsed by a broad coalition of organizations, the bill includes a $2,800 baby bonus separate from the Child Tax Credit that every household with at least $10,000 in annual earnings would receive shortly after birth. This past October, prominent pro-life and social conservative leaders joined the Niskanen Center in recommending a similar proposal to key House and Senate Republican leaders.

On the Democratic side, the 2024 Harris campaign proposed a $6,000 Child Tax Credit for parents — a bonus of $2,500 above her proposed regular benefit — in the first year following childbirth. Similar ideas to have more immediate economic relief in the months following childbirth have also been offered by House Appropriations Committee Ranking Member Rosa DeLauro (D-CT) in earlier tax policy negotiations. In 2023, Rep. DeLauro, along with Representatives Suzan DelBene (D-WA) and Ritchie Torres (D-NY), introduced the America Family Act, which would make permanent the Child Tax Credit that was passed as part of the 2021 America Rescue Plan Act.

These distinct proposals indicate a real appetite for Congress to offer parents extra economic security as they welcome a newborn.

In 2025, Congress will have the opportunity to translate these opening offers into concrete options for incorporation into any possible extension and modification of the 2017 tax cuts. In doing so, lawmakers should consider immediacy, wide reach, and clean definitions as three guiding principles when crafting the details for a baby bonus.

The early months of an infant’s life quickly create new costs for family budgets. Parents can feel more secure knowing that they can access additional support immediately — rather than wait until the next upcoming tax filing season or for a more staggered extra resource delivered over the course of an entire year after one or both parents are working full time again. Lawmakers should thus create a straightforward process where parents send their newborn’s Social Security number to the IRS, which would be charged to turn around a one-time payment quickly.

Every qualified family would stand to benefit from a baby bonus. However, this support would especially go farther for moms and dads who will not receive paid family leave through their state government or private employer. Think, for instance, of parents who have just recently entered or rejoined the workforce following medical treatment, postsecondary and vocational education, or caregiving responsibilities and who have yet to work sufficient hours to qualify for paid leave. An earnings requirement can work for a baby bonus, but we need to make sure it is not too onerous and won’t leave these new moms and dads behind. Ideally, policymakers should craft a postpartum credit that phases in quickly, with a full amount available to parents with limited income.

Each year, parents navigate a maze of existing family benefits in our tax code and social safety net — many with duplicating and often conflicting qualifications and definitions of an eligible child and parent. These administrative burdens create hardship for households and contribute to high improper payment rates for federal taxpayers. In designing a baby bonus, lawmakers should avoid unnecessary complexity and adhere as much as possible to established, widely used definitions of a qualifying parent and child — specifically those currently used for the Child Tax Credit.

Congress will have a unique opportunity in 2025 to translate bipartisan commitments into an agenda that empowers hard-working parents. Ultimately, “there’s nothing more pro-family than trying to soften the costs associated with welcoming a new child into the world.” Lawmakers from across the political spectrum would be wise to explore a baby bonus in the months ahead.

David Jimenez is the manager of government affairs for Niskanen Center’s social policy team, where he works to advance the think tank’s policy approaches to housing, child care, family security, paid leave, and unemployment insurance with lawmakers and partners.

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