Joe Manchin is calling for a work requirement for the child tax credit. Would that be effective?

Janet Nguyen Oct 20, 2021
The new child tax credit is distributed to families on a monthly basis. AleksandarNakic/Getty Images

Joe Manchin is calling for a work requirement for the child tax credit. Would that be effective?

Janet Nguyen Oct 20, 2021
The new child tax credit is distributed to families on a monthly basis. AleksandarNakic/Getty Images

The future of the federal child tax credit is in flux as politicians debate the stipulations that should be attached to the monthly payment. 

While President Joe Biden wants to permanently extend the credit, moderate Democratic Sen. Joe Manchin of West Virginia has called for stricter provisions. Manchin said the credit must include a “firm work requirement” and a “family income cap in the $60,000 range,” Axios reported this week.

But the living wage for a family of four in nearly every state is above $60,000, according to 2019 calculations from CNBC, which used MIT’s living wage calculator and took into account factors such as food, housing and child care. Some states are more expensive than others — it takes about $81,000 to get by in California and about $88,000 in New York. Child care alone can be an astronomical burden for parents, averaging roughly $8,000 a year nationally.

The newly revamped child tax credit, part of Biden’s American Rescue Plan, provides checks to families without requiring a minimum income. Established in 1998, the credit had previously required families to make at least $2,500 a year to receive the full credit.

In this new iteration, qualifying families receive up to $300 per month for each child under age 6 and up to $250 for each child between 6 and 17. The benefits phase out for single filers whose adjusted gross income exceeds $75,000 for the 2021 tax year and married couples filing jointly who make more than $150,000. 

These payments not only can help families get immediate relief for necessities like food and diapers, but can enable parents to invest in long-term goals for their children, Marketplace reporter Caroline Champlin previously reported.

On Friday, the fourth round of payments reached nearly 36 million families, with additional payments set to go out on the 15th of November and December. 

The history of work requirements 

Various public assistance programs entail a work requirement, like Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program, formerly known as food stamps and now often referred to by its acronym, SNAP. Several states also began tying work mandates to Medicaid in recent years, although the Biden administration has rolled back some of those. 

Back in 1975, the U.S. government created the earned income tax credit, which — as the name suggests — only applies to earned income, explained Elena Prager, an associate professor of strategy at Northwestern University’s Kellogg School of Management. 

“Meaning that it only works if you are working,” she said.

About twenty years later, Prager said, the 1996 welfare reforms added work requirements to social safety net programs that previously didn’t have them. The legislation, signed by President Bill Clinton, led to the creation of TANF, which sought to reduce dependence on government. 

The thinking was: “If you give people something that can be construed as a handout, then they will not learn to support themselves, and they may sink deeper into poverty or deeper into dependency,” Prager said. 

Others thought taxpayer money would subsidize people they perceived as “essentially lazy,” she added.  

But Prager co-authored a study that looked at the effects of SNAP work requirements on employment. It found that the rules did not boost employment and caused almost a quarter of participants to leave the program, with the homeless most likely to lose assistance.

“In my work on work requirements in SNAP, it doesn’t seem to be the case that getting rid of work requirements makes people any less likely to work and to maintain paid employment,” she said. 

For able-bodied participants between the ages of 18 and 49, without children, one of the requirements they can fulfill to receive SNAP benefits for an extended period of time is performing at least 80 hours a month of paid or unpaid work. (The full list of requirements is available here.

Prager said maintaining that SNAP-mandated level of employment in our “21st century labor market” — rife with part-time jobs and unpredictable scheduling — can be challenging. 

Ellen Meara, a professor of health economics and policy at Harvard University, also pointed to Medicaid policies in Arkansas, which became the first state to require recipients to show they were working or looking for work. 

“What happened in that state is about 18,000 people lost Medicaid benefits because of those work requirements,” Meara said.

“They do not always do what they’re designed to do,” Meara said. “The families that may have the most trouble meeting some kind of a work requirement are those who are already disadvantaged.” 

She noted that during the era of welfare reform in the 1990s, with that strong labor market, people who had been on public assistance entered the workforce and employment rates went up. But Meara added that their employment often didn’t last very long. 

Work requirements don’t work

Prager said having work requirements makes programs more difficult to administer. She said the purpose of the child tax credit doesn’t make sense if we have to put conditions on what parents do with their time.

“If the point is to lift children out of poverty, then my personal opinion is that we should be designing the credit to do that as effectively as possible, rather than designing it in a way that claims it’s for the purpose of reducing poverty, but ends up being an incentive program for the adults,” she said.

For most of the period since welfare reform, Prager said, there wasn’t a lot of empirical evidence suggesting whether work requirements actually get people to work — or spend more time doing it. 

But that changed as more researchers conducted studies on this topic. 

“By and large, the empirical evidence does not really bear out the economic theory that putting these requirements in place will get many people to work who wouldn’t otherwise have worked,” Prager said.

With the child tax credit, the work requirement could end up depriving the neediest children of aid.

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