A smart way to help families
Good, bipartisan ideas that meaningfully improve the lives of millions of Americans sometimes make it through the otherwise partisanship-plagued, soul-sapping, progress-thwarting machine called the United States Congress. This time, Republicans and Democrats have struck a $78 billion tax agreement that expands refundable child tax credits to help families with lower incomes.
Here’s hoping that it gets a serious hearing in the U.S. House, where many right-wing Republicans are eager to kill it in the crib and it’s looking good, having passed the Ways and Means Committee on Friday with a vote of 40 to three.
The proposal, crafted by Senate Finance Committee Chairman Ron Wyden and Ways and Means Chairman Jason Smith, builds on lessons learned during COVID, when the American Rescue Plan upped the federal Child Tax Credit from $2,000 to $3,600 for qualifying children under the age of 6, and to $3,000 for older children up to age 17. Previously, only kids 16 and younger qualified.
Most importantly, by making the credit fully refundable, families who wouldn’t otherwise have qualified because their income was too low — meaning, they didn’t owe any federal taxes — were finally dealt in.
The expanded credit, delivered to many via monthly advance payments, slashed child poverty as few other measures ever have. Driven by it and other measures, child poverty fell to its lowest level on record in 2021, just 5.2%.
Predictably, Congress let the benefit expire, and the credit reverted to its old amount of $2,000 per child, and old structure, whereby “virtually all children living in households in the top half of the income distribution qualify for the full credit amount,” while the “vast majority of children living in households in the bottom decile of the national income distribution are completely ineligible.”
Just as predictably, that led to a sharp one-year increase in child poverty, from 5.2% in 2021 to 12.4% in 2022. About one in three kids didn’t get the full credit, and these were, according to Columbia’s Center on Poverty and Social Policy, disproportionately “children of color, young children, children in single-parent families, children in larger families” and “children in rural areas.”
Actions and inaction both have consequences. Poverty is not just lack of spending money for toys and candy; it coincides with increased risk of homelessness, hunger, inadequate educational opportunities and more.
The revived expanded credit doesn’t do everything the early 2021 version did, but it ups the maximum credit over time and adjusts the rules in ways especially beneficial for struggling families, so that everyone who earns $14,000 a year or more will qualify for the full refundable credit.
Under current law, parents of three kids making as much as $34,000 still don’t qualify for the whole tax boost. The Center on Budget and Policy Priorities says that taken together, the measures will lift around 400,000 kids out of poverty and make 3 million poor kids better off than they were before — this year alone. The numbers would get better still next year.
The deal put together by Wyden and Smith connects the child tax credit to reviving some expired business tax cuts passed during the Trump administration. While it’s a bit dispiriting to think that a measure proven to lift hundreds of thousands of kids out of dire economic straits requires such a sweetener, it’ll be well worth the cost. Get it done.