Making the Child Tax Credit Fully Refundable: A Primary Strategy for Closing Opportunity Gaps

Why has this public education blog been relentlessly covering President Biden’s struggle to push Congress to pass a Build Back Better bill that repairs and expands the Child Tax Credit?  Our society has for decades tolerated an appallingly high child poverty rate. The relevance of this injustice to public education has, however, been poorly explored. Child poverty undermines children’s engagement and participation at school.

There is broad agreement that among the most substantial ways to address childhood economic inequality is by reforming and expanding the Child Tax Credit, a federal program initiated in 1997 that has helped middle and even upper income families, but has left out the poorest families whose parents pay too little in taxes to benefit fully from the program.

The National Education Policy Center’s Kevin Welner explains the connection of a child’s economic circumstances with that same child’s school achievement: “Those of us who work in or with schools never question the enormous impact that a teacher or school can have on a student. But this essential truth coexists with another truth: that differences between schools account for a relatively small portion of measured outcome differences. That is, opportunity gaps in the U.S arise primarily outside of schools. This should not be a surprise. Poverty, concentrated poverty, and racialized poverty are pervasive features of America. School improvement efforts cannot directly help children and their families overcome decades of policies that perpetuate systemic racism and economic inequality. When children are born in the United States, their educational and life outcomes can all be predicted based on their parents’ education, income and wealth. Compared to the Scandinavian countries and other so-called Western democracies like Canada, Spain, Australia, and New Zealand, American children are inordinately trapped in intergenerational poverty. Inequality in the U.S. is stark and enduring.”

A dozen years ago, the Schott Foundation for Public Education published Lost Opportunity: A 50 State Report on the Opportunity to Learn in America and launched its urgently important Opportunity to Learn Network, whose goal has been to define the difference between school achievement gaps and larger opportunity gaps. In the 2002, No Child Left Behind Act, the federal government had demanded that public schools close school achievement gaps as measured by standardized test scores. The Schott Foundation advocated that policymakers address opportunity gaps in children’s lives at school and in the hours children spend outside of school. The Schott Foundation has supported projects addressing impoverished children’s lack of access to the kind of supports economically privileged children take for granted.

An expanded Child Tax Credit—included temporarily in the 2021 American Rescue Plan COVID relief bill, and passed last November in the U.S. House of Representatives’ version of Build Back Better—addressed child poverty by increasing the per-child amount of the Child Tax Credit, making payments monthly to help parents living paycheck to paycheck, and making the Child Tax Credit fully refundable, meaning that even parents with little or no income could receive the funds.

The Center on Budget and Policy Priorities explains why that last provision is so important: “Build Back Better would permanently extend a provision of the 2021 American Rescue Plan making the Child Tax Credit ‘fully refundable,’ meaning that children in families with the lowest incomes receive the same amount as children in higher-income families. Previously, 27 million children—including roughly one-third of all children, about half of Black and Latino children, and half of children in rural areas—received less than the full credit or no credit at all because their families’ incomes were too low.  Full refundability marks an important step in reducing racial disparities in income and poverty rooted in this nation’s long history of racism and discrimination, which has created large gaps in both opportunities and outcomes in education, employment, health, and housing.”

Because Democratic Senator Joe Manchin has repeatedly declared that he will not support a Build Back Better if it includes expansion of the Child Tax Credit, many have assumed that expanding the Child Tax Credit and making it fully refundable cannot happen in today’s U.S. Senate.  However, a stalwart group of Democratic Senators has been working to keep the issue alive. Ohio Senator Sherrod Brown, and Senators Michael Bennet (CO), Cory Booker (NJ), Raphael Warnock (GA), and Ron Wyden (OR) sent a letter to President Biden declaring their continued support for making permanent last year’s reforms to the Child Tax Credit. They were joined at a recent news conference by Rep. Rosa DeLauro (CT) and Rep. Suzan DelBene (WA) promising that they will not stop working to prevent the rollback of last year’s temporary reforms to the Child Tax Credit.

Researchers and reporters have also continued to examine the facts around arguments made by Manchin and by Republicans in the U.S. Senate.  ProPublica‘s Eli Hager describes Senate Majority Leader Mitch McConnell (R-KY) and Senator Chuck Grassley (R-IA) claiming that the 1996 Temporary Assistance for Needy Families law that replaced welfare has addressed child poverty and made reforms in the Child Tax Credit unnecessary. Hager responds: “They are simply wrong about the success of TANF.  It is a program distinguished by failure. Last year marked the 25th anniversary of the Clinton-era welfare reform law that created TANF, which inspired me and my colleagues at ProPublica to investigate the current state of cash assistance in this country.”

Hager explains that while TANF was passed as a federal program, it is administered by the states: “Some states… avoid spending TANF dollars to help struggling moms, dads and kids. In Arizona, only 6% of families below the poverty line are able to obtain assistance from the program, partly because the state uses more than $150 million a year of its (federal) TANF funding to instead pay for child welfare investigations of many of the very same poor parents, as well as the foster care costs of removing their children….” “In New Mexico… low-income single mothers applying for TANF are forced, in a relic of colonial ‘bastardy’ laws, to first identify the father of their child (and his eye color, license plate number and parents’ addresses), and also to recall under penalty of perjury the exact date when they got pregnant, before they can get a small amount of cash assistance…. When a state has all of this information, it can then go after the dads for child support—much of which the government pockets. (ProPublica found that in 2020, nationally, more than $1.7 billion in child support from fathers meant to go to their kids was instead diverted into government coffers, as part of TANF’s design.)”

At the end of January, National Public Radio‘s Cory Turner reported on data from the Columbia University Center on Poverty and Social Policy, which regularly tracks child poverty.  Turner summarized the Center’s conclusions about the significance of last year’s temporary expansion of the Child Tax Credit: “What happened when families earning less than $35,000 a year suddenly had extra money in their bank accounts each month? They used it to buy food, clothing and school supplies, pay their utility bills and cover the rent… Less often, families spent the benefit on vehicle (19% of families), child care (16%) or to pay down old debts (17%)… The monthly payments slashed food insufficiency by a quarter… There’s no evidence the money drove caregivers to quit working… In fact, in interviews parents and caregivers commonly say this benefit helped cover the costs that made working easier by paying for child care or transportation.”

A week ago, the Washington Post‘s Jeff Stein presented stunning new, mid-February data from the Columbia Center on Poverty and Social Policy, data which describes what has happened since mid-December, when Congress ended the expanded monthly Child Tax Credit payments provided temporarily under the American Rescue Plan: “The Center on Poverty and Social Policy at Columbia University said that the child poverty rate rose from 12 percent in December 2021 to 17 percent last month, an approximately 41 percent increase. The study found that an additional 3.7 million children are now in poverty relative to the end of December, with Black and Latino children seeing the biggest percentage point increases… Most dramatic for lowering child poverty was the expanded Child Tax Credit, which was made both more generous and extended to nonworking and poor parents who had traditionally been excluded from receiving benefits.”