For the first time in half a year, families on Friday are going without a monthly deposit from the child tax credit—a program that was intended to be part of President Biden's legacy but has emerged instead as a flash point over who is worthy of government support. The monthly tax credits were part of Biden's $1.9 trillion coronavirus relief package—and the president had proposed extending them for another full year as part of a separate measure focused on economic and social programs. But Democratic Sen. Joe Manchin objected to extending the expanded credit out of concern that the money would discourage people from working and that any additional federal spending would fuel inflation that has already climbed to a nearly 40-year high. From the AP:
- "Credit had been a "godsend." Retiree Andy Roberts, from St. Albans, West Virginia, Manchin's home state, relied on the checks to help raise his two young grandchildren, whom he and his wife adopted because the birth parents are recovering from drug addiction. The Roberts are now out $550 a month. That money helped pay for Girl Scouts, ballet and acting lessons, and kids' shoes, which Roberts noted are more expensive than adult shoes. The tax credit, he said, was a "godsend." "It’ll make you tighten up your belt, if you’ve got anything to tighten," Roberts said about losing the payments.
- Size of credit is being cut. Families only received half of their 2021 credit on a monthly basis; the other half will be received once they file their taxes in the coming months. The size of the credit will be cut in 2022, with full payments only going to families that earned enough income to owe taxes, a policy choice that will limit the benefits for the poorest households. And the credits for 2022 will come only once people file their taxes at the start of the following year.
- Researchers said it could cut child poverty 40%. Researchers said the credits improved outcomes for impoverished children, whose families could not previously access the full tax credit because their earnings were too low. An analysis by the Urban Institute estimated that extending the credit as developed by the Biden administration would cut child poverty by 40%.
- "You're going to have to learn to adapt." West Virginia families interviewed by the AP highlighted how their grocery and gasoline bills have risen and said they'll need to get by with less of a financial cushion than a few months ago. "You’re going to have to learn to adapt," said Roberts, who worked as an auto dealer for five decades. “You never really dreamed that everything would all of a sudden explode. You go down and get a package of hamburger and it’s $7-8 a pound." According to IRS data, 305,000 West Virginia children benefited from the expanded credit last month.
- 36M families received payments last month. By the Biden administration's math, the expanded child tax credit and its monthly payments were a policy success that paid out $93 billion over six months. More than 36 million families received the payments in December. The payments were $300 monthly for each child who was five and younger, and $250 monthly for children between the ages of six and 17.
- Credits didn't cut workforce. The tax credits did not cause an immediate exodus from the workforce, as some lawmakers had feared. The Bureau of Labor Statistics reported that the percentage of people with jobs increased from 58% the month before the monthly payments began to 59.5% last month. That same trend occurred in West Virginia, where the employment-population ratio rose to the pre-pandemic level of 52.9%. There's an academic debate over whether the credit could suppress employment in the long term, with most studies suggesting that the impact would be statistically negligible.
- Manchin's alternative. One of the key questions for policymakers is whether bureaucracies or parents are better at spending money on children. Manchin has proposed a 10-year, funded version of Biden's economic proposal that would scrap the child tax credits focus and instead finance programs such as universal pre-kindergarten, to avoid sending money directly to families. "It’s a moral question of do you trust families to make their own decisions," says Katherine Michelmore, an associate professor of public policy at the University of Michigan.
(Read more child tax credit