Over 35 million families around the US have begun receiving the first monthly child tax credit payments, with the majority receiving the full $300 per child per month. The tax credit is available to all but the wealthiest US families, with payments set to lapse after a year. President Joe Biden is looking to extend the payments through to 2025 and, ultimately, to make the payments permanent. Democrats see the tax credit as a landmark program that will lead to better outcomes for children, however, some Republicans warn that the payments will discourage parents from working and ultimately feed into long-term poverty.
But the extra $1,000 a month for the next year could be a life-changer for Daniel, who now works as a community organizer for a Richmond nonprofit. It will help provide a security deposit for a new apartment.
“It’s actually coming right on time,” she said. “We have a lot going on. This definitely helps to take a load off.”
Biden has held out the new monthly payments, which will average $423 per family, as the key to halving child poverty rates. But he is also setting up a broader philosophical battle about the role of government and the responsibilities of parents.
Democrats see this as a landmark program along the same lines as Social Security, saying it will lead to better outcomes in adulthood that will help economic growth. But many Republicans warn that the payments will discourage parents from working and ultimately feed into long-term poverty.
Some 15 million households will now receive the full credit. The monthly payments amount to $300 for each child who is 5 and younger and $250 for those between 5 and 17. The payments are set to lapse after a year, but Biden is pushing to extend them through at least 2025.
The president ultimately would like to make the payments permanent — and that makes this first round of payments a test as to whether the government can improve the lives of families.
Biden invited beneficiaries to the White House to mark the first round of payments, saying in a Thursday speech that the day carried a historic resonance because of the boost it will give families across the nation.
“This would be the largest ever one-year decrease in child poverty in the history of the United States of America,” the president said. “Millions of children and their families, starting today, their lives are about to change for the better. And our country would be better off for it as well.”
Florida Republican Sen. Marco Rubio, who successfully championed increasing the credit in 2017, said that the Democrats’ plans will turn the benefits into an “anti-work welfare check” because almost every family can now qualify for the payment regardless of whether the parents have a job.
“Not only does Biden’s plan abandon incentives for marriage and requirements for work, but it will also destroy the child-support enforcement system as we know it by sending cash payments to single parents without ensuring child-support orders are established,” Rubio said in a statement Wednesday.
The administration disputed those claims. Treasury Department estimates indicate that 97% of recipients of the tax credit have wages or self-employment income, while the other 3% are grandparents or have health issues. The credit also starts to phase out at $150,000 for joint filers, so there is no disincentive for the poor to work because a job would just give them more income.
Colorado Democratic Sen. Michael Bennet said the problem is one of inequality. He said that economic growth has benefited the top 10% of earners in recent decades, while families are struggling with the rising costs of housing, child care, and health care. He said his voters back in Colorado are concerned that their children will be poorer than previous generations and that requires the expansion of the child tax credit.
“It’s the most progressive change to America’s tax code ever,” Bennet told reporters.
Parenthood is an expensive undertaking. The Agriculture Department estimated in 2017, the last year it published such a report, that a typical family spends $233,610 to raise a child from birth to the age of 17. But wealthier children get far more invested in their education and upbringing, while poorer children face a constant disadvantage. Families in the top third of incomes spend about $10,000 more annually per child than families in the lower third.
The child tax credit was created in 1997 to be a source of relief, yet it also became a driver of economic and racial inequality as only parents who owed the federal government taxes could qualify for its full payment. Academic research in 2020 found that about three-quarters of white and Asian children were eligible for full credit, but only about half of Black and Hispanic children qualified.
In the census tract where Daniel lives in Richmond, the median household income is $14,725 —almost five times lower than the national median. Three out of every 4 children live in poverty. For a typical parent with two children in that part of Richmond, the expanded tax credit would raise income by almost 41%.
The tax credit is as much about keeping people in the middle class as it is about lifting up the poor.
Katie Strelka, of Brookfield, Wisconsin, was laid off from her job as a beauty and hair care products buyer for the Kohl’s department store chain in September as the pandemic tightened its grip on the country. She and her sons, 3-year-old Oliver and 7-year-old Robert, were left to depend on her husband’s income as a consultant for retirement services. The family was already struggling to pay for her husband’s kidney transplant five years earlier and his ongoing therapies before she was laid off, she said.
With no job prospects, Strelka reenrolled in college to study social work in February. Last month she landed a new job as an assistant executive director for the nonprofit International Association for Orthodontics. Now she needs daycare again. That amounts to $1,000 a week for both kids.
All the tax credit money will go to cover that, said Strelka, 37.
“Every little bit is going to help right now,” she said. “I’m paying for school out-of-pocket. I’m paying for the boys’ stuff. The cost of food and everything else has gone up. We’re just really thankful. The tide feels like it’s turning.”
In conclusion
The child tax credit payments in the US, averaging $423 per family, are being seen by Democrats as a landmark program that will lead to better outcomes for children, while Republicans fear it will discourage parents from working and ultimately lead to long-term poverty. The credit, which is available to all but the wealthiest families, will lapse after a year but President Joe Biden is looking to extend it through to 2025 and ultimately make it permanent. The payments are expected to halve child poverty rates in the US, and Treasury Department estimates suggest that 97% of recipients have wages or self-employment income. Credit is being viewed as a means to improve the lives of families and tackle inequality.
FAQ
What is the child tax credit?
It is a monthly payment of up to $300 per child to help families with children under 17.
Who is eligible for the child tax credit?
All US families except the wealthiest ones, with income limits set at $150,000 for joint filers.
How long will the child tax credit payments last?
The monthly payments will last for one year, but President Biden wants to extend them through at least 2025.
What is the goal of the child tax credit?
The goal is to reduce child poverty rates and improve outcomes for children, ultimately making the payments permanent.
Will the child tax credit discourage parents from working?
Some Republicans warn that it might, but the administration disputes these claims.
How much money will families receive from the child tax credit?
Families will receive up to $300 per child under 6 and $250 per child aged 6 to 17.
How many households will receive the full child tax credit?
About 15 million households will receive the full credit.
How does the child tax credit help families in poverty?
Families in poverty will see their income increase by almost 41% with the expanded tax credit.
Is the child tax credit progressive?
Yes, it is the most progressive change to America’s tax code ever, according to Sen. Michael Bennet.
Will the child tax credit contribute to economic and racial inequality?
It was a driver of inequality before, but the expanded child tax credit aims to reduce such inequality.