Child tax credit: is the expanded child tax credit dead? Did this help?
Children ate better, families paid off their debts and parents were able to improve their job skills when the expanded child tax credit was sent directly to American families.
That’s according to a Brookings Institution global working paper released this month that examines the now-defunct expansion, which was paid monthly for six months. The report, “The Impacts of the 2021 Child Tax Credit Expansion on Family Employment, Nutrition, and Financial Well-Being,” draws on data from the Credit Panel Survey Social Policy Institute Child Tax Survey.
The nationally representative panel included 1,782 credit-eligible US parents. The survey also had a comparison group of 2,015 ineligible households. The evaluation was based on a survey wave just after receipt of the final payment.
As part of the U.S. bailout, Congress temporarily increased the Child Tax Credit from $2,000 to $3,000 for income-qualifying families for children ages 6 to 17, or $3,600 for younger children. For the second half of 2021, payments were sent monthly to most eligible families. And the credit was made refundable, so families with little or no earned income were eligible, which is normally not the case.
At the end of 2021, the expanded tax credit did the same, even though tax filing season has just ended and many are collecting the half that was to be paid as a lump sum.
The report found that families generally used the monthly payments “to cover living expenses without reducing their employment. Eligible families benefited from better nutrition, less reliance on credit cards and other high-risk financial services, and also made long-term educational investments for parents and children.
The changes were “particularly promising” for low- and middle-income families, as well as black, Hispanic and other minority families, according to the report, which was led by researchers from Appalachian State University, Washington University. in St. Louis, the University of North Carolina Greensboro and Urban Institute.
Some common uses of monthly installments include:
- 70% paid for current household expenses like housing and utilities.
- 58% bought clothes or other essentials for their children.
- 56% bought more food for the family.
- 49% have money set aside for emergencies.
- 42% have repaid their debts.
The researchers did not find statistically significant job changes for those who were eligible for monthly payments and those who were not. But the authors noted that eligible households were 1.3 times more likely to start work on learning new job skills, compared to those not eligible for the tax credit.
“Low- and middle-income families eligible for the (tax credit) were also more likely to report having acquired work skills, more likely to report improvements in their ability to manage emergency expenses, and less likely to report using expensive financial services like payday. auto title lending and lending, compared to non-CTC eligible families,” the report said.
More than 6 in 10 people who received monthly payments said it was easier for them to budget, compared to receiving a tax credit in a lump sum after filing their taxes. And a report by the Niskanen Center said the payments were particularly helpful to people in rural communities.
But according to Vox’s Dylan Matthews, “there’s a simple answer to why the Child Credit didn’t continue: There weren’t 50 senators willing to support the extension.” And most public reports suggest the main holdout was Sen. Joe Manchin.
Manchin, a Democrat from West Virginia, rejected many social policy proposals under Biden’s Build Back Better framework. As for the child tax credit, he would like a household income cap of $60,000 and a firm work requirement, Axios reported.
“Some reports have also suggested that Manchin thought the money would go towards buying medicine – a lingering concern about cash-for-the-poor programs (Manchin’s office declined to confirm or deny that he had expressed this concern privately),” Matthews wrote. “This suspicion is ill-founded; the best review of the evidence on the issue that I know of concluded that there was little reason to believe that cash transfers increased drug or alcohol abuse.
Others expressed concern that the child tax credit, without work incentives, would actually discourage work. Sen. Marco Rubio, R-Florida, for example, has pushed for more credit, but doesn’t think families should get the credit if they don’t earn enough income, as the Deseret News reported in january.
A working paper written by researchers at the University of Chicago’s Becker Friedman Institute for Economics in October predicted that having no work requirement “would drive 1.5 million workers (about 2.6% of all working parents) to leave the labor market”. This, in turn, would reduce the gains made in reducing child poverty, they said.
Others, including Greg Nasif, spokesperson for the bipartisan nonprofit advocacy organization Humanity Forward, believe the payments have been a big help in strengthening families and boosting jobs.
“We have never seen a government program that works so effectively,” Nasif told Deseret News. “He gives money directly to people who need it. It reaches well over 90% of the people it is supposed to support. Families use it to better feed their children. They use it to get back to work. By earmarking the money for child care costs, it frees them up to work more hours. There has been a marked growth in the number of low-income people who are self-employed, starting new businesses, developing non-profit organizations, etc.