COVID-19

Relief bill could lift millions of kids out of poverty by expanding tax credit

Kimberly Adams Feb 24, 2021
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According to the OECD, the U.S. has one of the highest child poverty rates in the developed world. Spencer Platt/Getty Images
COVID-19

Relief bill could lift millions of kids out of poverty by expanding tax credit

Kimberly Adams Feb 24, 2021
Heard on:
According to the OECD, the U.S. has one of the highest child poverty rates in the developed world. Spencer Platt/Getty Images
HTML EMBED:
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We’ve been looking into different parts of the big COVID-19 relief package working its way through the House of Representatives, possibly coming up for a vote later this week, and some of the ways it aims to use changes to tax law to provide economic relief in the pandemic.

Yesterday we told you about a proposed expansion of the earned income tax credit, and today we’ll look at what the relief package would do for the child tax credit.

Eligible families already get a tax credit for every kid 16 and under once a year when they file their taxes. Under the Democratic proposal, they’d get monthly payments starting as soon as this summer, and their total benefit would grow.

“So it’s going to go up from $2,000 to $3,000 for all children, and then an additional $600 for young children,” said Katherine Magnuson, who runs the Institute for Research on Poverty at the University of Wisconsin-Madison.

Another change? Right now, some families with the lowest incomes miss out on some of the benefit

“If you don’t have a full tax bill, then you don’t get the full credit,” Magnuson said. Under this proposal, they would.

The Organization for Economic Cooperation and Development says the United States has one of the highest child poverty rates in the developed world. Several analyses estimate these changes could lift 5 million to 10 million children out of poverty.

“The kids who don’t receive the full credit right now are predominantly kids who are lower income, many who are living in poverty, and many who are either Black or Latino,” said Katherine Michelmore, who teaches public administration at Syracuse University.

But, as with the proposed $15 minimum wage, there are questions about whether this belongs in a pandemic response bill. 

Maya MacGuineas at the Committee for a Responsible Federal Budget supports the idea of expanding the credit. But: “It is a policy that should be structured for situations that exist outside of the COVID crisis. And it is a policy that is so important that it’s permanent and durable, that it should be paid for,” she said.

MacGuineas points to a proposal by Utah Republican Sen. Mitt Romney that would overhaul funding for child poverty programs more broadly. 

COVID-19 Economy FAQs

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

Give me a snapshot of the labor market in the U.S.

U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.

What do I need to know about tax season this year?

Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.

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