New Efforts Seek to Reduce Growing Rates of Child Poverty
February 8, 2021
President Biden seeks to raise the child tax credit to $3600 for children under 6 and to$3000 for school age children under 18. This is up from the current level of $2000 per child. As part of the stimulus, this change would become effective in July and last for one year though many Democrats would like to see the change made permanent. The credit would be available to individuals making $75,000 or less and couples making $150,000 or less. It would be based on income data from 2019 or 2020. To increase the effectiveness of the tax break, families could receive monthly payments of between $250 and $350 to meet their routine bills. Researchers at Columbia University estimate that this measure could reduce the child poverty rate by close to 50%. The proposal gained support with the weak jobs report released last week. The cost of the program would increase the federal deficit by 120 billion dollars.
On February 8th the American Family Act was re-introduced in Congress; it would maintain these increases and extend them to individuals making up to $150,000 and couples making up to $200,000. In order to maintain the value of this increase, future credits would be tied to the rate of inflation. Mitt Romney has introduced a competing bill which would provide a tax credit of $3000 for school age children and $4200 for children under 6 but the net gain would be undermined by the elimination of the TANF program (Temporary Assistance for Needy Families, often referred to as “welfare”); the end of the State and Local Tax deduction (SALT); the loss of the head of household designation; and cuts to the Child and Dependent Care Tax Credit.
The losses of family income and resources, from the pandemic, have increased food insecurity in families with children from 14-28% and roughly 20% of these families are behind in rent. Treasury Secretary Janet Yellin has promoted the child tax credit as one mechanism to help the economy, especially given the tepid rate of the jobs recovery. She cautions that failure to act quickly and large will result in a long and slow economic recovery like the one seen in response the to 2008 recession. Though there would be a cost to the fiscal budget, the ultimate cost of child poverty will be far greater in hunger and housing loss as well as in the future well-being of children who will suffer setbacks in education, health, and work.
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