Expanding Child Tax Credit Recognizes There Is More We Can Do For Children – ITEP
Since 2013, the Federal Reserve has released an annual household finance survey that has consistently found that four in ten Americans don’t have $ 400 to cover an emergency. Tens of millions of us live on a ledge where a setback – a big medical bill, a car repair or accident, loss of job or reduced working hours – can turn into a financial crisis.
A March New York Times article describes how Anique Houpe, a single mother who held two jobs, quickly slipped into financial distress during the throes of the COVID-19 health and economic crisis after quitting her job to supervise her two sons whose grades dropped after they switched to distance education. She battled a severe case of COVID, was denied unemployment insurance benefits, and quickly faced deportation. Ms. Houpe’s story is not unique. Congressional Democrats today hosted an event on the Hill featuring moms who will benefit from the expanding child tax credit. They too have had to deal with job loss, distance learning and multiple jobs to make ends meet. Twenty-seven percent of households are considered low-income with incomes at 200% or less of the federal poverty line: a family of four is expected to earn $ 53,000 to reach that level in 2021. Even families in the middle of income distribution live in a precarious state in which a setback can result in serious financial hardship. Decades of public policy have created structural inequalities in our economic system, but some political leaders and public figures continue to perpetuate the myth that people can have it all if they work hard enough.
For the next six months, low-, middle- and upper-middle-income families with children are eligible to receive a portion of their 2021 Child Tax Credit (CTC) in the form of advance monthly payments. The total credit is $ 3,000 for each child with an additional $ 600 for each child under six. This works out to up to $ 250 or $ 300 per month per child. President Biden’s US bailout, enacted in March, increased the amount of credit (from $ 2,000 to $ 3,000 or $ 3,600) and for the first time made it available to families with little or no no income. More than putting money in people’s pockets, this policy recognizes “the dignity of working class and middle class families,” as President Biden said last week.
Most families with children are eligible for the CTC, but the expanded credit is strategically targeted to provide the greatest benefit to families at the bottom of the income scale who have been left behind in many ways by an economy that does not work for them. The expansion ends after $ 112,500 in income for heads of households and $ 150,000 for couples filing jointly. The bulk of spending on extended credit (nearly 70 percent) goes to families earning less than about $ 70,000 a year. The credit will increase income by an average of $ 2,800 for all eligible households. For the poorest families, this is a very large sum of money. Those with incomes below about $ 22,400 would see an average increase of 35% in their income, which for some will be life changing.
The country has already used the tax code to help low-income working families: Refundable federal tax credits, including the earned income tax credit and the CTC, have proven to be essential tools in fight against poverty that together lifted 7.5 million people out of poverty in 2019, according to Census Bureau data. But by making the CTC almost universally accessible to all families, including the poorest, this policy recognizes that there is room for improvement and that we can do more as a country to ensure that children have the means. resources they need to thrive.
By paying the credit each month rather than forcing families to wait until the spring of the following year, the program can make a bigger difference than ever in helping families meet their needs as they arise. . Invoices are due weekly and monthly, not once a year. Giving that money to families faster can help them stay at home, keep food on the table, buy school supplies and other basic necessities. Parents with varying financial means say advanced credit will help them pay past due bills, take vacations, make ends meet, or just put money aside for the future or on a rainy day.
The expanded CLC is expected to expire at the end of this year if Congress does not act. President Biden has proposed to permanently make the credit fully refundable and to maintain the targeted increase (to $ 3,000 and $ 3,600) until 2025. Without legislation, the federal CTC amount falls to the pre-TCJA amount. of only $ 1,000 per child after 2025. This reform so that children, especially those from low-income families, can continue to see the benefits of this program even after the year is the right thing to do. It has to be high on the priority list for Congress.
Our nation has a deep economic divide. Some of us did not experience any financial hardship during the worst of the health and economic crisis because we had secure jobs in which we could work from home, or we had enough resources to weather a temporary financial setback. But some of us lost our jobs or saw our hours drastically reduced and immediately faced food and housing insecurity. The expanded CLC alone will not solve our country’s growing problem of economic inequalities, but it may be the start of rethinking our public policies and determining how they can work better for all of us, not just an elite.
Beyond the impact of this policy at the federal level, there is so much potential for continued expansion to encourage positive reforms at the state level, where regressive taxation is known to be a widespread problem. Often times when we see the federal government implementing a good policy idea (such as a fully refundable child tax credit) that can spur state lawmakers to follow suit and offer a similar benefit, sometimes directly. linked to federal rules. I hope we will see permanent federal reform in this area followed by states taking a close look at this reform as well, to help put their own tax systems in order and promote economic security within their own jurisdictions. own borders.