Finding Money for Kids – Progressive.org
For Sasha Foster, a mother of two in Connecticut, the expanded federal child tax credit (CTC) was particularly welcome last year. Foster was pregnant in 2020, “so being able to have some relief the following year helped,” she says, especially because she wasn’t working full-time after the birth of her daughter. She and her husband could worry less about paying for “the normal necessities of life,” like laundry detergent and gasoline. This summer, Foster’s son, who is about to enter first grade, is looking forward to camping.
The American Rescue Plan Act, passed in 2021, made changes to the CTC that allowed most families nationwide to receive a tax credit of up to $3,600 per child. The credit was fully refundable, meaning families would benefit even if they owed no tax. It was also available to low-income parents and guardians, regardless of income level – there was no minimum income threshold before benefits began. For the most part, half of the benefit was paid up front over the six months from July to December 2021, and the rest was provided as a lump sum during tax season last spring.
In a brief period, the expanded CTC reached the parents and guardians of over sixty-one million children and reduced monthly child poverty by almost a third. Then it ended, and Build Back Better — President Joe Biden’s plan to stimulate the economy that included extending credit — never passed. Without the expansion, the credit amounts to $2,000 per child, with only up to $1,500 refundable and with an income requirement of around $12,500 to receive the full refundable credit. After 2025, the credit drops to $1,000.
Although the child tax credit is a tax credit — that is, it provides benefits to families through the tax system — it cannot escape the treatment it offers . If not, why is it hidden in the IRS if not to avoid being maligned as “welfare”? Yet despite this caution on the part of policy makers, it still happens.
Child poverty rose 41% nationally after the federal child tax credit expansion expired.
Republican Senator Marco Rubio of Florida alleged in a statement that the credit “removes incentives for marriage, destroys the child support enforcement system and abandons work requirements.” According HuffPost, Democratic Sen. Joe Manchin of West Virginia worried that parents would use the benefits to buy drugs. Their concerns echo age-old racist complaints that the lazy get a government check instead of working.
Yet in the absence of federal CTC expansion, some states have enacted their own child tax credits, circumventing anti-welfare rhetoric to provide much-needed money to low- and middle-income families. .
Connecticut is one such state, having passed a one-time child tax refund this spring, so Foster and her family will enjoy another income boost. Maybe, she says, it will go to gasoline to drive her son to summer camp.
“The Federal [CTC] expansion has put this problem on the map,” says Aidan Davis, director of state policy at the Institute on Tax and Economic Policy, a national tax and budget research organization. “It gave states an opportunity to see what such a policy could do and the impact it could have on people’s lives.”
Prior to the creation of the expanded CTC in 2021, five states gave parents or guardians a credit on their state taxes for their dependent children. Since then, six more states have passed legislation to create child tax credits, and a handful more have offered their own.
Overall, a state-level child tax credit is or will be available to at least some parents and guardians in California, Colorado, Idaho, New Jersey, New Mexico, New York , Maine, Maryland, Massachusetts, Oklahoma and Vermont. In addition, Rhode Island adopted a one-time child tax credit and Connecticut adopted a one-time child tax refund.
Because these are state programs – funded by budgets that must be balanced – state appropriations tend to be much smaller than federal appropriation, and certainly smaller than federal expansion of the CTC from last year. Credits also vary by state in terms of structure; for example, some are targeted at young children under a certain age, since young children benefit the most developmentally from cash-based programs like the CTC. By putting more money in families’ pockets, state CTCs can emulate what federal expansion has done: reduce child poverty by providing families with the money they need to make ends meet.
The expanded federal credit “provided really targeted relief to families who needed it most,” says Amber Wallin, executive director of advocacy group New Mexico Voices for Children. She adds that beyond simple relief, income support “creates[d] long term opportunities [for children] to thrive,” because research consistently shows that cash assistance programs for families support children’s health, educational outcomes, and overall well-being. This is especially true for children of color, as they are more likely to live in poverty.
At a time of dual economic and health crises, most families have spent profits on basic necessities like food, utilities and clothing. In New Mexico, about 43% of households reported using their federal CTC to pay off debt. This increased economic security seemed on the verge of disappearing with the failure of discussions last fall to pass the Build Back Better Act in the Senate, and therefore an extension of the CTC. New Mexico Voices for Children began working with the state to find ways to fill the void. “It became clear that the federal authorities weren’t going to intervene,” Wallin said. “New Mexico had to step up.”
After all, child poverty rose 41% nationally after the federal expansion expired. According to an American study, without credit, more than a third of households with children report having difficulty covering their usual household expenses.
The New Mexico credit is small compared to the federal expansion — it will provide up to $175 per child, depending on household income — but it will go to every child in the state. This is important for New Mexico because children in the state experience some of the highest rates of poverty in the United States – nearly a quarter of New Mexico children live in households with incomes of below the poverty line.
Most state child tax credits are not universal like in New Mexico, with states instituting income caps as well as income requirements. These changes limit who can receive the appropriations, though they may make it easier for state legislatures to pass CTC bills with bipartisan support. In Maryland, for example, parents or guardians can receive $500 per eligible child, but only if the child has a disability and the family’s annual income is less than $6,000.
In Vermont, Democratic State Representative Janet Ancel sponsored legislation to create a permanent child tax credit for households with children under the age of six, which was signed into law in May. At $1,000, the Vermont CTC is one of the largest in the United States, although it is restricted to children under six and families earning less than $125,000. “It really works like a [child] allowance,” says Ancel, as the entire $1,000 is fully refundable and there is no minimum income requirement.
Ancel believes that the new CTC state “makes[s] clearly what our priorities are and where we want to make our investments; that is, families and children.
In Connecticut, after attempts to adopt a permanent credit failed, a one-time child tax refund of $250 per child was implemented starting this year. Sana Shah, chief of staff for Connecticut Voices for Children, says her organization worked for three years to establish a child tax credit in Connecticut. Although the refund is temporary, she notes that it is gradual, as there is no income requirement, and because it is a refund, it is fully refundable. “It’s quite similar to the [federal expansion], it’s just that the families get less,” says Shah. “It’s a good start.”
Some Conservatives are not totally opposed to a child tax credit. Senator Mitt Romney, Republican of Utah, has proposed a child tax credit that would provide up to $350 a month. The main difference between Romney’s plan and last year’s expansion is that the senator’s bill includes an income requirement: the maximum benefit is only available to children whose households earn at least $10,000. $ per year, and the poorest children get nothing. This requirement, according to Romney’s proposal, “encourages work.” It is also structured to incentivize marriage, as two income streams are more likely to reach $10,000 than one.
Some “pro-family” conservatives might support a strong child tax credit as long as it excludes the poorest people; this way, the policy can increase the declining birth rate, but only among those earning a certain income. That thought was the basis of a longtime child tax credit proposal by Senators Rubio and Utah Republican Mike Lee, which was modeled on a plan by conservative economist Robert Stein. In 2015, Stein said bluntly The week that his version of the credit was “not designed to encourage fertility among the poor beyond what we are already doing”.
Additionally, Romney’s bill co-sponsor, Senator Steve Daines, Republican of Montana, leads the Senate Pro-Life Caucus. Passing a child tax credit, especially a tax credit with a work requirement, could bolster support for Republicans following the disappearance of Roe vs. Wade and its abortion protections at the end of June. Indeed, Rubio and Lee waited until the day the Supreme Court overturned Roe to unveil new legislation that would increase the CTC and allow pregnant women to claim their expected children.
Child tax credit policy may not seem like a battlefront in the next culture war, but we’re already there. Is the purpose of credit to protect poor children or to reverse a declining birth rate? Either way, states have identified tax policy as a way to center children and families in law-making — now it’s a question of who their tax credits will go to.