Expanded child tax credit is called a “game changer”
The economic stimulus bill President Joe Biden signed Thursday includes provisions that will move millions of children out of poverty and will begin making direct payments to families by the middle of this year.
The Center on Budget and Policy Priorities estimates that an expanded tax credit included in the legislation will lift 137,000 North Carolina children out of poverty.
According to the U.S. Census, 19.5% of the state’s children lived in poverty in 2019.
Michelle Hughes, executive director of NC Child, called the child tax credit part of the legislation a “game changer.”
“We know that the pandemic has really hit low-income families and families of color hardest,” she said.
The bill increases the existing child tax credit from the maximum $2,000 per child to $3,600 for children younger than 6, and to $3,000 for children younger than 18. The increase is for one year, but some congressional Democrats are talking about making it permanent.
Parents whose incomes are too low to qualify for the existing credit could claim it for this year. Single filers with incomes up to $75,000 and married couples with incomes up to $150,000 can claim the full amount. The legislation requires the IRS to estimate the credit to be claimed by each household and start sending out checks periodically in mid-year. Parents can claim the balance when they file their taxes next year.
Reviews of the $1.9 trillion bill say it will reduce child poverty by as much as 50%. Similarly, a 2019 study prepared by the National Academies of Sciences, Engineering, and Medicine presented the expanded tax credit as one of the elements in its prescriptions for cutting child poverty in half in 10 years.
Parents with incomes well above the poverty line can also claim the tax credit. The Center on Budget estimates that 92%, or nearly 2.1 million children in the state who are younger than 18 will benefit.
The Federal Reserve Bank of New York reported last month that low-wage workers were hit hardest in the pandemic, and that the unemployment rate “rose significantly more for the Black population.”
NC Child has an advisory group of parents whose children are covered by Medicaid or NC CHIP health insurance.
Those parents have said they would use additional money for expenses such as paying utility bills, buying their children clothes and other basics, and for activities that would help their children counter the isolation that’s come from not attending school in–person, Hughes said.
“This proposal is exactly what our kids and families need right now,” she said. “We’ve been in a public health crisis since last March. Millions, tens of millions of Americans have lost their jobs and have been unemployed for a long time.”
Lisa Gennetian is an associate professor in the Sanford School of Public Policy and a faculty affiliate in the Center for Child and Family Policy at Duke University. She and others have an ongoing study, Baby’s First Years, that looks at infant and toddlers’ brain development when their mothers receive debit cards worth $333 a month compared to children whose mothers received $20 a month.
The first results of the study are expected later this year.
She said it’s long past time for the United States to put increased attention on child poverty.
“There’s a lot to celebrate here,” she said.
The opportunity is open for broader discussions about supporting the well-being of children and families and addressing structural inequities, she said.
She noted that the National Academies of Sciences report was published before the pandemic and its massive job losses.
Other countries that send cash to families and communities in the United States are trying small guaranteed income projects using private money.
“Many places have cash transfers,” Gennetian said. “The U.S. is kind of late in the game.”
In non-Western countries, families spend the money on basic needs, she said.
Durham Mayor Steve Schewel is one of about 40 mayors from around the country who support a guaranteed income.
The Magnolia Mother’s Trust in Jackson, Miss., distributed $1,000 a month to a small number of low-income women for a year. The pilot ran through November 2019. A second group of 110 started getting money from the program in March 2020.
Stockton, Calif., started a project called SEED in February 2019 that gave 125 residents $500 a month for two years. The residents were chosen from neighborhoods where the median household income was at or below $46,033.
A preliminary analysis found that the guaranteed income enabled recipients to find full-time jobs, improved their health, and freed them to work toward career and personal goals.
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