The United States has one of the highest child poverty rates in any rich country and one of the smallest share of national spending on children and families. Approximately 1 in 7 children live in poverty, according to the most recent data from the Census Bureau. More than a quarter of black children and a fifth of Hispanic children live below the poverty line.
When the child tax credit was established in 1997 by a Republican-led Congress under former President Bill Clinton, very few low-income parents could claim it. That’s because the $ 500 credit was non-refundable and the federal income tax for these families was very low.
As a result, the child tax credit currently offers up to $ 2,000 per child under the age of 17. Single parents who earn up to $ 200,000 and couples who earn up to $ 400,000 qualify for the full credit, which is phased out after these limits.
About 90% of families with children will receive an average credit of $ 2,380 in 2020, according to a non-partisan estimate from the Tax Policy Center.
And the credit, along with the income tax credit earned for working families with low and moderate income, helps nearly 12 million children lift themselves out of poverty or raise them closer to the poverty line, according to the Center Budget and Political Priorities.
Low-income families were left out
Still, 27 million children live in low-income families who receive partial or no credit because they earn very little, according to the center. Parents must have an annual income of at least $ 2,500 to start claiming the benefit, but the amount they receive depends on their income.
“At the moment, low-income children get the minimum, when in fact they should get the maximum,” said Chuck Marr, senior director of federal tax policy at the center. “It would help them a lot.”
The credit would increase to $ 3,600 per child under the age of 6 and $ 3,000 per child aged 6 to 17 for a single year, according to legislation introduced in the House on Monday. The full thrust would be available to single parents earning up to $ 75,000 annually and couples with an income of up to $ 150,000, before leaving the program to earn more.
It would become fully refundable for even the lowest-income families to qualify. And it could be paid monthly, $ 300 per month for each child and $ 250 for each older child – giving parents a steady stream of income to pay rent, buy groceries and handle other expenses – instead of a lump sum once per year, the typical way families receive tax credits.
That would lift more than 4 million children out of poverty and millions closer to the poverty line “at once,” Marr said. “It gives millions of children a better chance to live up to their potential.”
Representatives Rosa DeLauro of Connecticut, Suzan DelBene of Washington and Ritchie Torres of New York also introduced autonomous legislation on Monday that would continue the expanded benefit permanently.
Republicans favor child tax credit
These provisions are unlikely to get any Republican support because they are included in the larger aid package that Democratic leaders are quickly adopting through a procedure called reconciliation, which will allow them to pass without Republican votes.
But some Republicans also support the review of the child tax credit. Utah Senator Mitt Romney last week unveiled a proposal to provide a monthly cash benefit of $ 350 for each child ($ 4,200 per year) and $ 250 for each school age child ($ 3,000 per year).
He says his plan establishes a “firm national commitment to all families in America”, while promoting marriage, offering equal treatment to families who work and stay at home and reducing child poverty by up to a third.
To pay for his $ 66 billion measure, which also includes changes in income tax credit, Romney would eliminate several existing government assistance programs – including Temporary Assistance for Needy Families – and tax provisions, including deducting state and local taxes.
Sam Hammond, who helped Romney formulate his proposal, co-authored a report entitled “The Conservative Case for a Child Pension” for the Niskanen Center, a study center where he serves as director of poverty and welfare policy.
The current child tax credit has not really been effective as an anti-poverty tool because it excludes lower-income families by definition, he said.
A universal allowance for children would solve both child poverty and family instability, said Hammond, who noted that marriage rates have dropped in the past four decades and that the birth rate in 2019 reached the lowest rate in 35 years. Part of the reason is the rising cost of housing and daycare.
Since parents receive no more than childless workers, they are at a disadvantage as they need to support their dependents, Hammond said. Monthly payments for children would level the playing field.
Romney’s proposal would be executed through the Social Security Administration, instead of the IRS, to transfer the benefit to a monthly subsidy instead of a tax credit.
“It’s basically Social Security for children,” said Hammond.
But other Republicans, including Rubio and Utah Senator Mike Lee, oppose the idea of sending checks to parents, regardless of whether they have jobs and receive income.
“We do not support the transformation of the child tax credit into what has been called ‘family allowance’, paid as universal basic income to all parents. This is not a tax break for working parents; it’s social assistance, ”the senators said in a joint statement last week.
“An essential part of being pro-family is being pro-work. Congress must expand the child tax credit without undermining parents’ responsibility to work to support their families,” they said.