The expanded federal child tax credit is helping families. Congress is debating its future.

By: - September 15, 2021 5:35 am
The Urban-Brookings Tax Policy Center estimates that parents of about 2.3 million children nationwide might not receive the payments because they earned too little in 2019 and 2020 to file tax returns. (Stock Photo: Adobe Stock)

Like millions of women, Sarah Anderson saw her income drop during the pandemic when her two part-time jobs ended and caring for her four children and supervising online school consumed her days.  

The federal child tax credit helped fill the gap left by that lost income. Parents started receiving monthly payments of $250 to $300 for each child on July 15 and will do so through December. They can claim the rest of their credits when they file their taxes next year. 

The enhanced credit is only for 2021, but there’s a push by advocacy groups to make it permanent. 

Anderson used the first of the tax credit money to buy back-to-school clothes for her children, ages ten, eight and six. Anderson’s youngest is four and on a preschool waitlist.  

“It kept our family afloat, honestly,” said Anderson, whose husband works as an accountant. “It didn’t replace my income, but it’s been enough. I panicked on how to pay for back-to-school clothes.” 

A big impact, but some families miss out

For this tax year, the American Rescue Plan increased the federal child tax credit from $2,000 to $3,000 for children ages six to 17, and from $2,000 to $3,600 for children younger than six.

Couples with a household income of less than $150,000 and heads of household with incomes less than $112,500 can claim the full amount. The credit begins to phase out for households with incomes above those thresholds, and can be reduced by $50 for every $1,000 of income.

But some of the households that need the money most might be missing out. The Urban-Brookings Tax Policy Center said that parents of about 2.3 million children nationwide might not receive the payments because they earned too little in 2019 and 2020 to file tax returns.  

Its analysis shows parents of about 50,000 North Carolina children might not be receiving the credit. The households are spread throughout the state, but more than 500 are in Wake Forest.  

State Rep. Terence Everitt, a Democrat whose district includes Wake Forest, said he had not heard of residents of his district not receiving tax credit payments, but would look into it further.  

Families are entitled to those tax credits and should be getting them, especially if they are in desperate need, Everitt said. “I find it concerning and something we’re going to have to follow up on with those communities,” he said. 

Millicent Rogers has used the monthly payment for COVID-19 -related costs for her 10-year-old son, who fears becoming infected. Rogers’s son has severe allergies that cause his nose to bleed when he’s outside in the heat. The blood gets on his masks, which require frequent washing.  

The tax credit payments have helped Rogers purchase good-fitting, high-quality disposable and reusable masks, as well as in paying to do extra laundry at her apartment complex and buying more food so her son can bring his lunch to school and avoid the cafeteria line.  

Then there’s the extra money needed for gas so she can take her son to after-school care; because of driver shortages, bus routes are limited. 

Advocacy groups say the increased credit and the provision making it fully refundable means that parents who don’t owe taxes qualify. And that has had an outsized impact on Black and Latinx children.  

“The tax credit is enormously powerful,” Eric Rodrigues, senior vice president of UnidosUS, said in a news conference last week. “It’s already having important antipoverty effects on communities and particularly children of color. One of the biggest and most significant changes that we saw from the previous round of stimulus was making it fully refundable so that more Latino and African-American children could receive the credit than ever before.” 

Before the tax credit was fully refundable, about one in three children did not receive the full amount or any at all because their parents made too little money to owe taxes, according to the Center on Poverty and Social Policy at Columbia University.  

They were disproportionately children of color, children of single parents, and those living in rural areas, according to the findings. Seventy percent of households headed by single women did not receive the full credit.  

Making the expanded credit permanent?

UnidosUS, Color of Change, and Economic Security Project Action support making this year’s child tax credit changes permanent and extending it to include immigrant children with individual taxpayer identification numbers. The groups wrote a letter to Congress endorsing permanency signed by about 50 organizations.  

“There is no better investment Congress can make than in our nation’s children,” the letter said.  “It will pay back in the short term when parents inject these payments back into our local economies. And in the long run, the data are clear that lifting a child out of poverty leads to better nutrition, better test scores, and higher rates of school enrollment and college entry.” 

The U.S. House Ways and Means Committee last week proposed extending the enhanced, refundable child tax credit until 2025, The Washington Post reported. The extension is part of the $3.5 trillion economic package Democrats are crafting.  

U.S. Sen. Joe Manchin, a Democrat from West Virginia, suggested last weekend that parents should be required to work or go to school to get the credit. “Don’t you think, if we’re going to help the children, that the people should make some effort?” Manchin said during a Sunday CNN appearance. 

The Biden administration pitched the credit as a way to significantly decrease child poverty, and early research has shown such a reduction.  

Adults in households with children saw a three percentage point decline in food insufficiency in surveys after the first child tax credit payments landed in bank accounts, according to the U.S. Census Bureau. The survey also showed a decline in households that had trouble paying weekly expenses.  

Food insufficiency in households with no children was about the same before and after the tax credit payment, the Census Bureau said.  

The Center on Poverty and Social Policy at Columbia University found that the July payment kept 3 million children out of poverty that month, while the child poverty rate fell from 15.8% in June to 11.9%.   

Anderson, who lives in Durham, is a former Kindergarten, middle school, and special education teacher. She left the classroom after the birth of her second child. The cost of childcare was greater than her salary, and returning to work didn’t make economic sense, she said.  

The pandemic has taken a lot out of parents, she said, and it’s helped to have extra money to cover basic needs.  

“It’s not so much money that anyone is going to get rich off it,” she said. “Just to have a little more flexibility and have a little bit more stress taken off and not worry.” 

When her youngest child starts school, she’s considering returning to work as a substitute teacher so her schedule will match her children’s schedule. It’s tricky finding child care in the pandemic, she said.  

She’s also hoping Congress will keep the enhanced tax credit, though she’s not counting on it.  “I don’t get my hopes up that our government will do the right thing for women or families or children,” she said.  

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Lynn Bonner
Lynn Bonner

Investigative Reporter Lynn Bonner covers the state legislature and politics, as well as elections, the state budget, public and mental health, safety net programs and issues of racial equality.