The expanded child tax credit could “cut poverty in half”

Samantha Fields Jun 28, 2021
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More parents will be eligible for the child tax credit this year. Above, a mother and daughter stand outside of a community food pantry in New York. Spencer Platt via Getty

The expanded child tax credit could “cut poverty in half”

Samantha Fields Jun 28, 2021
Heard on:
More parents will be eligible for the child tax credit this year. Above, a mother and daughter stand outside of a community food pantry in New York. Spencer Platt via Getty
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For months at a time over the last year, Tami Burch had zero dollars coming in. 

She left her job as the dietary manager at a nursing home when the pandemic began because she was afraid of getting COVID-19 and because, as a single mom with twin 10-year-olds, she had no one else to stay home and take care of her children when school closed. Her unemployment benefits took months to arrive. 

“So for that period of time, I had no money,” said Burch, 41, who lives in Chanute, Kansas. “We had food money from our food card, but we didn’t have any cash at all to buy anything. So it was a disaster.” 

Starting in July, Burch will have at least $500 coming in every month — $250 for each of her kids. That’s because earlier this spring, as part of the last COVID relief package, Congress temporarily expanded the child tax credit and changed how it will be paid out. 

“This is one of the largest expansions of an anti-poverty program we’ve probably ever seen,” said Elyssa Schmier, vice president of government relations and national budget at the advocacy organization MomsRising. “It will likely cut poverty in half over the next year, childhood poverty in particular.”

That’s because of a couple of major changes that are in effect for this year.  

For one, the amount of the credit is increasing. For 2021, parents will get up to $3,600 per child for kids under 6, and up to $3,000 per child for kids 6 to 17. Last year, the maximum credit was $2,000 per child.

In addition to that, more parents are eligible this year than in the past. 

“The most important thing that’s happening is that very low-income children are being given access to the full credit,” said Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center. 

In past years, the child tax credit has had a minimum income requirement, so parents who earned no money, or very little, didn’t qualify for the whole amount, but parents earning up to $400,000 a year did. 

“That’s sort of an upside-down way to deliver child benefits, where middle- and high-income children were receiving the largest benefits, and the lowest-income children in some cases were receiving no benefit,” Maag said. 

This year, the credit starts phasing out sooner — at $75,000 for single filers and $150,000 for parents filing jointly — and it does not phase in, so the poorest families will qualify for the whole amount. Parents who are not required to file taxes because they earn too little will need to register with the IRS’ online portal to start receiving payments.  

“I think most people don’t think of the tax code as a place where you could really make a significant difference in the lives of families,” Schmier said. “But we’re talking about a lot of money here.”

For the first time this year, too, half of the child tax credit will go out in advance, as monthly payments starting in July, rather than a lump sum payment at tax time — unless parents opt out. The other half of the credit will be paid out in 2022 when parents file their taxes. 

Maag says that change is especially significant for low-income parents. 

“Two things are difficult for families with children who live in poverty,” Maag said. “The first is just a lack of resources. But the second is that incomes are bouncing around. So you’re not always poor in every single month, but in some months, you have very few resources.”

That can be detrimental for children, especially the youngest ones.

“By delivering the credit on a monthly basis, we guarantee that there’s some sort of minimum income coming into the household that can be used to meet basic needs to care for your children,” Maag said. 

And maybe even pay for some extras, like sports, art or music lessons. 

Tami Burch’s kids are already making plans for what they want to do with some of the money: Her daughter wants to take dance lessons, and her son wants to play soccer, football and basketball. 

“So I’m looking into sports programs that we can do now that we have some money to put that way,” she said. 

First, though, Burch needs to get her car back up and running, and pay to get it registered and insured again — all things she hasn’t been able to afford for months now because of the pandemic. 

Even before, when she was working, “on a normal everyday basis, we barely scrape by,” she said. “We were still real low income. I think my taxes, I know I made less than $16,000.” Less than $16,000 a year, when she was working full time. 

So, for Burch, the prospect of getting $500 a month from the child tax credit and just having that guaranteed baseline income is huge.  

“That’s rent,” she said. “It would help a lot. It would take a lot of stress away.”

Burch said “it would help” and not “it will,” because she doesn’t quite believe she’ll start getting that money. Not after everything she’s gone through the past year. 

“I just don’t put too much hope into anything anymore,” she said. “If it does happen, we’ll be super excited. But right now, I’m just holding my breath.”

She should get her first payment in July and keep getting them every month through the end of the year. But that’s it, for now. The expansion of the child tax credit is temporary, just for 2021. Many Democrats are pushing to make it permanent.

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