Although Manchin Doomed the Child Tax Credit in Build Back Better, Discussion Hasn’t Totally Stopped

It would appear that Senator Joe Manchin’s sabotage of the expanded Child Tax Credit as part of Build Back Better has killed the restoration of last year’s extraordinary but temporary improvement of this federal program as part of the American Rescue Plan COVID relief bill. But America’s child poverty advocacy coalition has not yet given up and neither have the experts at the Center on Budget and Policy Priorities. Democratic leaders in Congress—Senators Sherrod Brown, Michael Bennet, Cory Booker, Ron Wyden and Raphael Warnock—and Representatives led by Rosa de Lauro are still in conversation with Republican Senators Mitt Romney, Richard Burr and Steve Daines, who have offered two versions of their own Republican Child Tax Credit proposal.

It is urgently important for America’s public school educators and child advocates to keep on pushing for expanding the Child Tax Credit and making it fully refundable. The educational damage of child poverty cannot be solved through school reform. While teachers can support children whose lives are ravaged by our society’s alarming economic inequality, public schools alone cannot undo the stresses and privations that poverty imposes on America’s poorest children.

Much of the ongoing conversation this month has been about the Family Security Act,  proposed by Senator Romney and other Republicans, which would replace the Build Back Better Better version of the Child Tax Credit that was rejected by Senator Joe Manchin. Last week a coalition of national child advocacy organizations, the First Focus Campaign for Children, wrote a letter to Senators Mitt Romney, Steve Daines and Richard Burr to explain why their recent version of the Family Security Act isn’t good enough: this most recent version will leave America’s very poorest children in worse straits than a version Romney proposed in 2021.

Here is the First Focus Campaign for Children: “The good news is that we know what works to reduce child poverty.” A 2019 landmark National Academy of Sciences, Engineering, and Medicine (NASEM) “study finds that a child allowance, operating as an extension of the Child Tax Credit, is the most powerful tool we have to combat child poverty and narrow the racial poverty gap. Extensive research shows when households with children receive cash transfers, they spend it on resources that support their children’s healthy development—improving their physical and behavioral health and educational outcomes and leading them to earn more as adults… The first version (2021) of the original Family Security Act proposed by Senator Romney would have cut child poverty by an estimated 32.6%… Households with the least resources would have been eligible to receive the full (newly increased) Child Tax Credit… Unfortunately, as the Family Security Act morphed into version 2.0, changes focused on adults were made to the Child Tax Credit and significantly reduced the positive impact it would have on millions of children. The ‘best interests of children’ became an afterthought as the focus shifted to some sort of ‘deservedness’ standards for adults that has the effect of punishing children. As a result, the Niskanen Center’s updated analysis shows that the Family Security Act 2.0 would only reduce child poverty by just 12.6%.”

The Center on Budget and Policy Priorities details the primary reason why the latest version of the Family Security Act would punish children in families with the lowest income: “To qualify for the maximum credit for each child in the family, families would need to have earned at least $10,000 in the prior year… Families with earnings below $10,000 would receive a proportional credit. For example, a family earning $5,000 would receive 50 percent of the maximum credit for each child.”  Families with no income would no longer qualify, but couples earning up to $400,000 per year would qualify as would single parents making up to $200,000 annually.

But, as the Center on Budget and Policy Priorities further explains: “The $10,000 earnings requirement to receive the full credit would apply to all families, including parents with babies and young children, retired grandparents caring for their grandchildren, and parents with disabilities that may limit their ability to work.  It would also newly require caregivers not only to live with the child but also to have legal custody of the child, which is stricter than current law and may disqualify many grandparents or other relatives who care for children from claiming the credit. And it would impose a new restriction for families that include immigrants: under current law, children must have a Social Security number (SSN) to qualify for the Child Tax Credit, but the proposal would impose an additional requirement that a parent also have an SSN, denying the credit to children who are U.S. citizens if their parents lack an SSN.”

The Center on Budget and Policy Priorities explains another serious problem when several of the provisions of the newest version of the Family Security Act, are computed together: “The Romney proposal… (would require) families with low and moderate incomes to pay for more than half the cost of expanding the credit… The Romney plan would dramatically cut the Earned Income Tax Credit (EITC) a credit that provides an income boost for workers with low and moderate incomes, and eliminate the ‘head of household’ tax filing status, which millions of single parents who work at low-paying jobs use when they file their income tax returns… For example, consider a single mother who has a toddler and a daughter in second grade and works as a home health aide, making $25,000 a year. Her family’s Child Tax Credit would grow by $3,640 under the Romney plan, but they would lose $4,105 from the EITC cuts and the elimination of the head of household filing status, for a net income loss of $465. If both children were age 6 or older, the net income loss would be even larger: $1,665.”

The Center on Budget and Policy Priorities summarizes what would be the primary effects of the latest Family Security Act provisions: “Denying the full credit to children based on their parents’ earnings would do virtually nothing to boost parental employment and would withhold help from the children who most need it….

• “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 2.
• “Evidence from both the United States and Canada strongly indicates that giving the full credit to all children, including those whose families don’t have earnings in a year, won’t affect adults’ work participation to any large degree. Most estimates suggest around 99 percent of parents would continue to work under an expanded credit.
• “An earnings requirement hurts children whose parents are least able to meet basic needs, exposing these children to serious hardship.
• “Research links additional income to better outcomes for children in families with low incomes. The added income could significantly improve their long-term health and how well they do in school, make it more likely they will finish high school and attend college, and boost their earnings as adults.”

When Congress did not renew last year’s expansion of the Child Tax Credit, which temporarily made it fully refundable to all families with children, whatever their income, the program reverted to its pre-American Rescue Plan status. The Center on Budget and Policy Priorities emphatically reminds us all of the current Child Tax Credit’s primary injustice: “The major flaw in the current Child Tax Credit has been its denial of some or all of the credit to children in families with little or no income, even though they stand to benefit the most from the extra income. Prior to the Rescue Plan’s temporary expansion of the credit, roughly 27 million children received less than the full credit or no credit at all because their families earned too little. They included roughly half of all Black children, half of Latino children, roughly one-fifth of white children, one-fifth of Asian children, and roughly half of children living in rural areas.”

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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.”