For six months at the tail end of two tumultuous years, parents received direct payments — no strings attached — of as much as $300 per child in their bank accounts. Many accounts show that this money provided long-awaited relief to 61 million children, reducing poverty and hunger rates.
This week will be the first time since July that parents won’t have to pay a monthly fee.
The expanded child tax credit fell short of some of its biggest promises: It didn’t quite cut the child poverty rate in half, and millions of the most vulnerable families were still left out of receiving money. The full potential of the credit hinged on extending the new benefits permanently, advocates say — it was never expected to cut child poverty in just six months.
Now, the future credit is in jeopardy as Congress debates whether to include Any form of a permanent expansion in the Democrats’ Build Back Better package. As parents prepare for another wave COVID-19 cases, which could shut down schools and limit job opportunities, these negotiations are underway.
When the credit worked best this year, parents could count on it to manage the soaring cost of child care, pay for food, or cover the unexpected expenses that piled up during the pandemic, like the ones Rosa Walker’s family faced.
The Oregon mom of three earned $800 per month from July to December. It was one of the only moments when the pressure of the pandemic eased: She and her husband were forced to cut back hours at work, and the health of her entire family had suffered — she took six months to recover from COVID-19, her boys struggled with their mental health and her husband broke a rib in a roofing accident. They had $10,000 in credit card debt, which they had accrued since 2020.
The credit allowed the family to pay for higher child care costs for their 4-year old. They were also able to budget for opportunities to enrich their children’s lives, allowing her 8- and 10-year-old to go to soccer. Walker, an early intervention occupational therapist who specializes in working with young children, said that her ability to provide social support helped to alleviate some of the trauma caused by the pandemic.
“For me, it’s so clear that this is where to invest, not just because these are going to be our adult leaders, but because they deserve the best as children right now,” she said.
The one-year expansion of the child tax credit through Congress’s coronavirus relief plan of early 2021 was modified to remove an income requirement so that the poorest families in the country, the majority of them Black and Latinx, could access the full amount. The structure was changed to a monthly stipend, instead of an annual lump sum. The amount was increased from $2,000 to $3.600 and divided up into $300 per child under 6 and $250 per child between 6 and 17. The second half of the payments will come in with taxes this year — if parents are able to successfully claim them. The Internal Revenue Service will likely face significant pandemics-induced backlogsThis is the filing season.
Many Democrats, the White House and advocates expected the policy to be extended beyond a one-year expansion — but that has now been reduced to little more than a pipe dream. Sen. Joe Manchin of West Virginia, who has been the loudest Democratic opponent to the credit, has said he will not support Congress’s Build Back Better plan, an economic package that includes a permanent expansion of the child tax credit, specifically because he believes that credit should be modified so higher-income families are excluded with an additional requirement that parents be working to receive the money.
These changes will be significant concessions for Democrats who have pushed credit expansion. Time is running out to reach an agreement. If the expansion does not become permanent, the child tax credit will revert to what it was before: An annual allowance capped at $2,000 — instead of the $3,600 maximum now per child — that was not available to the poorest families in full.
“It’s almost harder to have [the child tax credit] and have it taken away,” Walker said.
Walker fears the impact of that decision could affect families years later, in tangible ways like less access to nutritional food or enough food at all, and in more intangible ways like the impact of parents’ stress on their family.
“I know as a country we really value children, even if it can sometimes feel like we don’t, but I also think children and families aren’t always the loudest voices and I think it can be very easy to miss the impact of not moving forward with this until much later,” she said.
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To understand the impact of the child tax credit, it’s important to measure what it was able to do in six months — and where it fell short.
In July, when the first payments went out, the IRS was able to reach 59.3 million children — about 88 percent of all kids in the country — and it increased that amount in subsequent months to more than 61 million.
A study by the Columbia Center on Poverty and Social PolicyThe payments made from July to November helped keep between 3 million and 3.8million children from poverty. At that point, the monthly child poverty rate dropped by 29 percent. The most significant effects were seen in Black and Latinx kids. The center found that Black child poverty had decreased by 26 percent and Latinx child poverty had fallen by 30 percent between November and November.
1 in 2 children of color didn’t get the full credit prior to the expansion. This was compared to 1 out 4 White children. These children were also more likely need credit for basic needs, such as food. (Black and Latinx kids experience twice the rate of food insufficiency — a more severe form of food insecurity that measures whether a family has enough to eat — as White children.)
According to Census Bureau survey data, most parents who received the tax credit for their child were more likely to use it than save. The top three items on the list were food, followed closely by essential bills, housing, and school expenses. An estimated 21 percent of parents used the money for debt repayments, while only 17 percent saved it. analysis from July to Augustby the Washington University in St. Louis Social Policy Institute
Parents like Karla MacKinnie, a single mother living in Detroit with her 10-year-old daughter and 11-year old son, needed the funds. McKinnie lost her job in the pandemic as a server and was without work for six months in 2020. This left her behind with rent and bills. While she was out of work, McKinnie took on a job as a caregiver for elderly people. However, the work was intermittent.
The tax credit helped her pay rent on time, and to provide WiFi for her children so they could continue virtual learning.
“Being a single mom and living check to check — actually day to day, for me — just being able to have that reassurance that it was coming on the 15th [of every month], it made me stress out a lot less,” McKinnie said. “I knew that we would have groceries and it would be OK for me to go grocery shopping and get everything that we needed.”
Some of the money was also used to pay for guitar lessons for her daughter. She is now looking back at a time when she was in financial distress, with the credit ending.
“It’s back to paying for the necessities,” she said.
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The greatest poverty-reducing power of the child tax credit was held in its ability to reach the people who had never received the full credit before — families that earned nothing at all or too little to file an income tax, or grandparents or parents with disabilities on a fixed income.
But many of those families weren’t reached at all, or only received partial payments. Researchers previously estimated that about 4 million children were at risk of not receiving the payments because their parents hadn’t filed taxes, would need to take additional steps to do so or faced language or technological barriers. They were most likely to come from low-income families, especially Black and Latinx children.
Anyone who had filed a tax returns in 2019 or 2020, or signed up through IRS to receive a coronavirus stimul payment, received automatic payments from the IRS. Families who didn’t fall into that category and were earning under $24,800 as a family could sign up for the child tax credit through a simplified form in a portal the IRS set up in June, prior to the start of the first payments.
It was difficult to sign up for the application. It was not available in English, was unclear, and was not compatible with a mobile phone. Low-income people are more likely than high-income people to own a smartphone. In September, Code for America, a tech nonprofit, made a new portal that was mobile-friendly and offered Spanish.
Gabriel Zucker, associate policy chief for the tax benefits team at Code for America, stated that more than 100,000 people signed-up through this portal. Most people took less than 10 minutes to complete the application, and most used it on their smartphones. He said that 4 out 5 users found it easy or very easy to use.
Code for America also helped market the website through benefits agencies, allowing people who didn’t file taxes but did receive some kind of government assistance to become aware of the option.
Realistically though, they never expected to be able to capture everyone in the first year of a program — one of the reasons why Zucker believes an extension of the child tax credit will help it get closer to reaching its original objective.
“What we have shown is that this population can be reached, but it’s going to take time to get to everyone,” he said.
Due to delays in setting up portals, newly eligible families had less time for signing up. Most of the outreach effort was being done at the community level by small groups that were overwhelmed with clients.
Because of a glitch in IRS system, families where one family member was undocumented immigrant and had a tax filing number didn’t receive any payments in July. Many of these families received the money instead in two parts in August. Others reported. never receiving it.
Elaine Maag (principal research associate, nonpartisan Tax Policy Center) said that the same happened to parents of newborns, who were not allowed to claim the children for child credit payments this year.
“It’s always the case that people that already face the most burdens and complexity in their lives have the least access to the services that are available,” Maag said.
On the ground, agencies helping people sign up for the credit reported a wide swath of problems, including tax forms that were filled out incorrectly by reputable organizations, absent parents who were wrongfully claiming the children instead, and credits that were marked as “issued” even though parents never received the money.
Melanie Malherbe is the managing attorney for the welfare law unit of Greater Boston Legal Services. She helped sign up low income families through the portal. She said her caseload was immense — and complicated. Malherbe said that even though Malherbe is a trained attorney, it was difficult to get answers and to sort through filing information.
“What I’ve observed is that the program could be great — if it was extended. Look at the impact it’s already had on children in poverty,” she said. “But there is an additional level of help and resources needed to extend to people in deep poverty that doesn’t exist.”
It had a real-life effect on families expecting a cash injection. They were left in limbo.
Katie Walden and her family saw credit’s upcoming arrival as an opportunity. Her husband had worked the pandemic to keep the family afloat. It was contract work, low-paid, and took them long hours. They thought that they could afford him to take a stable, lower-paying job.
The Waldens, who have a 3-, 7- and 9-year-old, should have received about $800 — they were eligible for the money and had received it in the past. But the credit didn’t arrive. They couldn’t understand why. In September, they received what they thought was a back payment of $1,000, and then in October their status changed from “eligible” to “pending.” No one at the IRS could tell Walden what had happened.
“It took away the opportunity of feeling fulfilled and feeling like you can be out of panic mode,” Walden said. “I think people don’t really understand what it’s like to put groceries back or say, ‘We can’t get strawberries because they are not on sale.’ To have children have an understanding of, ‘Oh, we are poor,’ that’s really hard to deal with.”
They plan to claim the full amount this year in their taxes, but that money will now go into paying back their parents, who helped them with expenses when the credit didn’t arrive.
“It’s just that demoralizing thing every time you have to ask for help, and we wouldn’t have had to ask for help if it would have worked out,” Walden said.
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Two major changes to the policy that could impact the future of the child credit are proposed: a work requirement and a lower income limit.
Prominent supporters of the expansion admit they may be open for discussion about some details of the plan but many insist it is working as intended. Rep. Rosa DeLauro, the credit’s longtime championIn a statement to the effect that The 19th that “there is no need to be negotiating on the design.”
“What I am laser focused on is the consequences for the families that are harmed by the lack of extension,” DeLauro said, adding that she is optimistic “we can get the child tax credit over the finish line.”
Sen. Michael Bennet, who has also pushed for the credit’s expansion, said told The 19th that Congress has “to find a way to extend it, and I’ll continue to look for any opportunity to do so.”
However, tax policy experts fear that the proposed changes could make the program even more difficult to access for the families most in need. This would negate the important changes that were made last year.
Megan Curran, the policy director at Columbia’s Center on Poverty and Social Policy who wrote the report analyzing the monthly payments, said that a work requirement, in particular, would erase some of the gains of a program redesigned specifically for poverty reduction.
The income requirements for parents to be eligible for the child tax credit were higher in the former version. They varied depending on how many children were in the household. This resulted in around a third of children not being able to access the credit, including half the Black and Latinx children whose parents were more likely than others to fail to meet the income requirements.
“I find it very difficult to make an argument as to why we should be able to return to that when we have been able to fix many of those issues,” Curran said.
Already, more than 95 percentPeople who are eligible for the tax credit include people who are currently working, those who were working recently, grandparents caring for children, persons with disabilities who are not working, and parents of very young children under 2.
Studies on the credit have not found any evidence it is causing people to stop working. A study of census data by researchers from Washington University, Appalachian State University, and Washington University found that parents’ rates of being unemployed to care of their children fell from 26 percent to 20% after the credit was released. This suggests that parents were using the credit to pay for child care.
The issue of changing the income cap has been a matter of contention for some time. Manchin and others argue that the program should not be used to support families with higher incomes. The maximum income limits for the child credit are currently $400,000 for couples and $200,000 for individuals. These maximums were established during 2017 tax law reforms.
Curran argues that the central point of the program was to help kids, regardless of parent’s income status. The pandemic has demonstrated that income status can change quickly and abruptly.
“It’s meant to be for kids. I think it makes sense that it’s available largely regardless of family economic circumstance,” she said. “There’s not all of a sudden these cliffs that happen if you earn $100 more at a certain point or $1,000 more at a certain point, you lose this.”
However, the debate about how to incorporate Manchin’s changes is still very nebulous. It’s unclear what kind of compromise Democrats are considering, and whether it will even be enough.
The American households still need the second half to receive the child tax credit payments. The IRS has started to send a letter to parents containing the amount they will need in their 2021 taxes to receive their full share. However, families who have moved or don’t have a permanent residence will face their own set of challenges.
“That will be confusing for a lot of families — it’s always confusing when the IRS sends a piece of mail to you,” said Maag at the Tax Policy Center. “You are going to have a lot of people who have not interacted with the tax system previously who are going to have to interact with it.”
One thing that may be more readily available this year will be tax filing sites that will open to coincide with the tax season, but because of the pandemic and a rise in Omicron variant cases, it’s likely those sites will be overwhelmed as it is.
Malherbe also pointed out that the most vulnerable families have the most complex cases and sites may not be able to assist them.
Without that aid, something that can’t be added in one year but could in subsequent years if the program was extended, she said, the tax credit’s potential will continue to be stunted.
“I am worried that some of the people who completely have not gotten anything for their kids yet are not going to get it unless there is the kind of level of help we’ve been giving,” Malherbe said. “There are just a lot of potential pitfalls.”
