New U.S. Census Report Shows Why Congress Must Permanently Expand the Child Tax Credit & Make It Fully Refundable in Year-End Legislation

This blog has strongly advocated that Congress should enact legislation to make permanent last year’s temporary expansion of the Child Tax Credit. New research confirms the urgency of Congressional action on the Child Tax Credit this year.

Two weeks ago, the U.S. Census reported* a stunning drop in poverty among U.S. children in 2021, largely thanks to the Biden Administration’s action—temporarily for 2021 alone—to expand the Child Tax Credit and make it fully refundable under the American Rescue (COVID-relief) Act.  That expansion of the Child Tax Credit ended in 2022.  Now it is apparent that unless Congress acts to restore what was a temporary reform to the Child Tax Credit, millions of American children will fall back into poverty.

The U.S. Census created a new measure of poverty in 2011, the Supplemental Poverty Measure, which reflects how government programs like SNAP, school lunch benefits, and refundable tax credits supplement family income and reduce poverty. The Census Bureau’s new report explains: “The SPM (Supplemental Poverty Measure) extends the official poverty measure by accounting for many of the government programs that are designed to assist low-income families but are not included in the official poverty measure. The SPM also includes federal and state taxes and work and medical expenses… Though the SPM does not replace the official poverty measure, it provides a different metric of economic well-being that includes resources from government programs and tax credits to low income families.”

In their September 13 report, using the SPM measure, U.S. Census Bureau researchers documented an extraordinary reduction in child poverty during 2021: “The SPM child poverty rate fell 46 percent in 2021, from 9.7 percent in 2020 to 5.2 percent in 2021, a 4.5 percentage-point decline. This is the lowest SPM child poverty rate on record.” “The decline in the SPM rate for children was largely driven by stimulus payments and the refundable Child Tax Credit, which led to increased resources for families with children.”

To review: In the American Rescue (COVID-relief) Act passed in the spring of 2021, Congress made several significant changes in the Child Tax Credit: raising the maximum Child Tax Credit from $2,000 to $3,600 per child through age 5, and $3,000 for children age 6-17; allowing families to receive a Child Tax Credit for 17-year-olds; sending the payments monthly instead of once a year, and making the Child Tax Credit fully refundable for the year 2021.  Making the Child Tax Credit fully refundable was an extremely significant reform. While, since 1997, families with comfortable incomes have qualified for the full Child Tax Credit, until the American Rescue (COVID-relief) Act, families with such small incomes that they pay little income tax received only a partial credit and not the full amount. Families without any income (who do not pay federal income tax) could not qualify at all for the tax credit. The Center on Budget and Policy Priorities explained in a November 2021 report:  “Prior to the Rescue Plan, 27 million children received less than the full Child Tax Credit or no credit at all because their families’ incomes were too low. That included roughly half of all Black and Latino children and half of children who live in rural communities… This upside-down policy gave less help to the children who needed it most. The American Rescue Plan temporarily fixed this policy by making the tax credit fully refundable for 2021.”

When the new Census data came out on September 13, the President of the Center on Budget and Policy Priorities, Sharon Parrott, immediately released a statement interpreting the significance of the drop in U.S. child poverty: “The data for 2021 show that the nation knows how to reduce poverty, broaden opportunity, and expand coverage. Temporary measures drove progress… The new data show that due chiefly to the Child Tax Credit, child poverty fell sharply in 2021 and reached a record low of 5.2 percent, as measured by the Supplemental Poverty Measure (SPM)…. As recently as 2018, 13.7 percent of children were below the SPM poverty line.”

Parrot scrutinizes the meaning of Congress’s temporary action last year to reduce American child poverty: “The Child Tax Credit expansion drove the large reduction in child poverty between 2020 and 2021…. In the absence of the expansion, child poverty would have fallen to 8.1 percent, rather than 5.2 percent, and some 2.1 million more children would have lived in families with incomes below the poverty line. The year-to-year decline in the child poverty rate was the largest on record (4.5 percentage points). Child poverty rates plunged widely across racial and ethnic groups…. For Black non-Latino children, the poverty rate fell to 8.3 percent in 2021 from 17.2 percent in 2020…. This is stunning progress—in 2018 nearly 1 in 4 Black children lived in families with incomes below the poverty line.  In 2021, fewer than 1 in 10 did… In 2021, poverty among Latino children fell to 8.4 percent and for American Indian and Alaska Native children it fell to 7.4 percent.”

Washington Post columnists, Paul Waldman and Greg Sargent believe Congressional action permanently to expand the Child Tax Credit would redefine our society morally: “We can choose to make our economic arrangements fairer. We can make collective decisions that children shouldn’t be disadvantaged at a very young age through no fault of their own. Making the choice to alleviate poverty early in people’s lives… puts children on a path to becoming healthier, happier, more fulfilled, more productive adults.”

Why is eliminating child poverty so significant in the life of each child?  The Center on Budget and Policy Priorities reviewed the consequences in an urgent new report last Friday: “For children, poverty can mean unstable housing, frequent moves, inadequate nutrition, and high levels of family stress, and other problems. These in turn have been linked with lower reading and math scores, more emotional and behavioral problems, fewer years of completed education, lower earnings, higher likelihood of being arrested, and poorer health in adulthood, a 2019 National Academies of Science, Engineering, and Medicine report on reducing child poverty found.”

Although Congressional opposition has blocked the inclusion of an expanded Child Tax Credit in economic legislation so far in 2022, there is still time for Congress permanently to expand the Child Tax Credit before the end of the year.  In last Friday’s report, the Center on Budget and Policy Priorities declared that the need is critical: “Congress and the Biden Administration now face a stark choice: whether to expand the Child Tax Credit or allow all of the gains against child poverty made over the last two years to evaporate, with millions of children needlessly falling back below the poverty line… Without the Child Tax Credit expansion, some 2.1 million more children would have been in poverty in 2021—including 752,000 Latino children, 649,000 white children, 524,000 Black children, 89,000 American Indian and Alaska Native children, and 56,000 Asian children…. Moreover, the Child Tax Credit expansion improved conditions for children of all races and ethnicities and narrowed differences in poverty rates between them.”

Many of us had feared that action on the Child Tax Credit was a lost cause in Congress this year, but it appears there is still hope. Economists at the Center on Budget and Policy Priorities explain that right now Congress is under pressure to reduce corporate taxes. They declare: “Policymakers should not put corporate interests ahead of the interests of children. That means that… (a) corporate tax cut related to research and experimentation expenses—or any other business tax cut—should not move without an expansion of the Child Tax Credit. Some policymakers have already made clear that they do not support moving ahead with a corporate tax break without an expansion in the Child Tax Credit. For example, in response to the Census report, Senators Bennet, Brown, and Booker and Representatives DeLauro, DelBene, and Torres said that Congress should not enact corporate tax provisions in year-end legislation without expanding the Child Tax Credit.”

* John Creamer, Emily A. Shrider, Kalee Burns, and Frances Chen, Poverty in the United States: 2021, U.S. Census Bureau, September 13, 2022, pp. 1-2.  The link would not import into WORDPRESS.  You may enter the following in any search engine: Poverty in the United States: 2021, September 13, 2022 .

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2 thoughts on “New U.S. Census Report Shows Why Congress Must Permanently Expand the Child Tax Credit & Make It Fully Refundable in Year-End Legislation

  1. Pingback: new ICYMI: Hello October Edition (10/2) 2022 – catchmeee

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