What’s the Word On: Child Tax Credit and Poverty
It’s not often you see the effects of Congressional action – or in this case, inaction– as quickly as we did with regard to the Child Tax Credit.
In an effort to stimulate the economy when much of the country started reopening after a months-long pandemic lockdown for much of 2020, Congress passed the American Rescue Plan in March 2021, a catch-all legislation that attempted to target many areas of the economy, such as child care, food assistance, health care, among other sectors.
One of the more crucial components was what’s known as the expanded Child Tax Credit (CTC), which provided between $250 and $300 per child to eligible families depending on their situation.
Researchers, and actual Census data, found that the increased benefits helped drive down child poverty to 5.2% in 2021 the year in which the expansive legislation was implemented. However, only a year later, it more than doubled, with child poverty increasing to 12.4%. One of the major reasons, according to researchers, is because Congress let the expanded CTC program expire. That translated to some 5 million more kids with less resources.
The expiration of the enhanced benefits helped save $109 billion. While that may sound like a lot of money, with respect to the federal budget, it’s a relatively small figure. A proverbial few drops in the bucket. One senator even went so far into denigrating the recipients of CTC, suggesting that they will use the expanded benefits to purchase drugs.
Actual facts, however, suggest the contrary. Income-restricted families used the additional funds toward housing, food (both of which were subject to significant inflation). As a recent Washington Post editorial described the expanded benefits, “it is a small cost for a substantial benefit to millions of American children.”
At least some states, both so-called “blue” (New Jersey, New Mexico, and Minnesota, for example) and “red” states (Oklahoma and Idaho), have been proactive and instituted their own child tax credit programs to assist their residents. But as with women’s reproductive rights issues, we have to prevent the child tax credit from becoming another patchwork, where eligibility to receive the benefit depends on where you live. What is needed is a consistent federal program so that all people who need it, receive it, regardless of their zip code.
We know that the expiration of the enhanced child tax credit is only partly to blame for the uptick in poverty. The highest inflation in four decades and generally higher cost of living –especially for housing food and clothing –are contributing factors. However, more and more research is showing that the federal programs that were expanded help to substantially reduce poverty.
A recent Time magazine article pointed out that it was in the South– where state leaders are generally leery of expanded federal government programs– where the child tax credit “had the greatest effect in helping low income families get the support they needed.”
President Biden said after the census Data came out that “the rise reported today in child poverty is no accident.” Some economists have said if the enhanced child tax credit remained in place, child poverty would have been 50% lower.
These programs have worked and should have been expanded. As the Time magazine article pointed out, the federal support over the last 3 years shows just how much progress communities can make to reduce poverty, but the data now reveals what happens when those resources dry up.
So the simple answer is to invest in these programs as we would like to think, pay now or suffer later.