In the American Rescue Plan, the COVID-relief bill passed in March, President Joe Biden and Congress temporarily increased the Child Tax Credit and made it fully refundable. Now, as House and Senate bargain and fight about President Biden’s Build Back Better Bill (sometimes called the reconciliation package), they need to invest in making permanent last spring’s temporary expansion of the Child Tax Credit.
Congress should not add parental work requirements as qualifications for families to receive the full Child Tax Credit. The program was designed to protect children from the ravages of poverty. Children should not be punished if parents are unable to work or unable to find or afford childcare.
The big problem with the Child Tax Credit until last spring when Congress temporarily expanded the program was that it helped middle class families far more than it assisted impoverished families whose children’s needs may be desperate. Until Congress fixed it temporarily in the American Rescue Plan, the Child Tax Credit was what the Center on Budget and Policy Priorities calls “an upside-down policy (which) gave less help to the very children who needed it most.” “Prior to enactment of the American Rescue Plan in March, 27 million children received less than the full Child Tax Credit or no credit at all because their families’ incomes were too low, including roughly half of all Black and Latino children and children who live in rural communities… Enacted in 1997, the original Child Tax Credit largely excluded children whose families had low or moderate incomes because the credit could only be used to offset a family’s income tax liability, not to boost a family’s low income.”
The Center on Budget and Policy’s September 7, 2020 report fills in the history of the Child Tax Credit: “As part of tax legislation, President George W. Bush signed in 2001, a bipartisan group of senators restructured the Child Tax Credit to make it partially ‘refundable,’ meaning that a family with little or no income tax liability could receive part of the credit as a refund… During each of the Bush, Obama, and Trump Administrations, policymakers on a bipartisan basis incrementally reduced the earnings threshold. Most recently, Republican Senators Marco Rubio and Mike Lee pushed to reduce it to $2,500 in the 2017 law, which also increased the maximum credit to $2,000 per child. But because the credit only phased in at the rate of 15 cents on the dollar for earnings above $2,500, a mother of two earning $15,000 received just $1,875 per year… still substantially less than middle-income families. The American Rescue Plan took a major step in rectifying this problem by making the full Child Tax Credit available to children in families with low or no earnings for 2021.”
The American Rescue Plan also increased the amount of the Child Tax Credit to $3,600 for each child under age 5 and to $3,000 for children ages 6-17. “The Rescue Plan also allowed the IRS to deliver the Child Tax Credit to families on a monthly basis, rather than as a lump sum at tax time. The monthly cadence of payments provides financial predictability and stability for families with incomes near the poverty line.”
In late September, as some members of Congress suggested adding parents’ work requirements as a condition for families’ qualification for the Child Tax Credit, the Center on Budget and Policy Priorities released a second report to define the explicit purpose of reforming the Child Tax Credit: to help support children living in poverty, not to punish unemployed parents. “Recent suggestions that Congress should deny the credit to children whose parents don’t have earnings are misguided. Taking away the full credit from children based on their parents’ earnings would needlessly leave in poverty — or push deeper into poverty — the children who need help the most, injuring their long-term health and educational outcomes and reducing their earnings as adults, while doing virtually nothing to boost parental employment…In more than 95 percent of families who benefit from making the credit fully refundable, the parent or other caretaker is working, between jobs, ill or disabled, elderly, or has a child under age.”
Permanently expanding the Child Tax Credit and making it fully refundable are tools for addressing economic inequality and racial injustice. The Center on Budget and Policy Priorities continues: “Prior to the Rescue Plan expansion, about half of Black and Latino children received a partial credit or no credit at all because their incomes were too low, compared to about a fifth of white children. About half of children in rural… communities were also excluded from the full credit due to their family’s low income. These facts reflect sharp disparities in the educational and employment opportunities available to Black, Latino, and rural communities… The nation’s high child poverty rate and gaping racial ethnic, and geographic disparities in child poverty have translated into lost opportunities for millions of children.” “The most common way people used their initial monthly Child Tax Credit payments this summer was to buy food… In the month and a half after the initial monthly Child Tax Credit payment was issued, the number of adults with children reporting that the household didn’t have enough to eat dropped by 3.3 million or nearly one-third.”
While middle class families have been receiving the full Child Tax Credit for each of their children since its inception in 1997, working poor and unemployed families have been excluded. The purpose of permanently expanding the Child Tax Credit is to help alleviate the threats of hunger, housing insecurity, and family stress for 27 million of our nation’s poorest children who have been left out of this program. It is time for Congress to do the right thing by making permanent the temporary reforms that were part of the American Rescue Plan.