11 Mar Millions of American parents will soon get a monthly allowance: 4 questions answered
This credit, currently pegged at up to $2,000 a year per child until they turn 17, will instead total $3,600 for children under 6 and $3,000 for kids up to the age of 18 over the next 12 months. Starting in July, the Internal Revenue Service will distribute half this money to most families with children in monthly payments of either $250 or $300 per child. The IRS will deliver the balance at tax time in 2022.
The Conversation U.S. asked Joya Misra, a sociologist who studies how public policies influence inequality, four questions about this new temporary benefit.
1. Why are families with children getting these benefits?
This program builds on the existing child tax credit, which reduces the tax burden for families with children as a way of offsetting part of the cost of raising kids. Of all age groups in the U.S., children are the most likely to live in poverty.
Families taking care of children must spend a great deal of money on food, housing, clothing, child care, school supplies and health care. This spending has greatly increased during the COVID-19 pandemic for many families, amid an unemployment spike.
These benefits are also useful for households with breadwinners who kept their jobs. Food costs have surged, and new needs have arisen for many families as they’ve scrambled to pay for sharply higher child care tuition, hire private tutors and try to address their kids’ many other new needs created by social distancing.
2. Do other countries provide these payments?
Just as it’s very common around the world to provide benefits for the elderly, the disabled and the unemployed, providing benefits for families with children is the norm. Most wealthy countries, and many countries that aren’t as well-off as the United States, have provided monthly benefits for children for decades.
Whether they’re in Canada, Germany or the United States, research shows that these payments are an investment in a nation’s future. They help families afford what their children need today to become healthy, educated and productive members of society tomorrow. Other research suggests that child poverty currently costs the U.S. government more than $1 trillion a year.
3. Could this arrangement continue past the 2021 tax year?
Yes. Rep. Richard Neal, a Massachusetts Democrat who chairs the House Ways and Means Committee, is reportedly seeking to make this benefit permanent. Reps. Rosa DeLauro, Suzan DelBene and Ritchie Torres, three other House Democrats, have reintroduced the American Family Act, which would permanently increase the child tax credit and make its payments monthly.
Sen. Mitt Romney, a Utah Republican, is proposing a different kind of monthly child allowance. It would replace the tax credit and a few other programs – leading to concerns that some Americans might benefit less if his proposal were to be adopted. Interestingly, Romney has called for the government to make these payments through the Social Security system instead of the IRS.
4. What impact will it have on childhood poverty?
Several experts have suggested that this package could halve child poverty, as has been widely reported.
Child poverty is extremely high in the U.S., relative to other rich countries, primarily because for decades it has spent less on supporting families with children. Nearly 1 in 5 American children live in poverty, far above the 12% average for the 37 wealthy and middle-income countries that belong to the Organization for Economic Development and Cooperation.
Biden’s proposed legislation included several sources of support for families with children. One study predicted that the entire package – including far more than the expanded child tax credit – would reduce U.S. child poverty by 57%.
Many of these provisions are in the legislation that Congress passed, with some notable exceptions. For example, the relief package doesn’t include an increase in the federal minimum wage.
Although a study from 2019 also suggested that expanding the child tax credit could halve child poverty, I don’t think that this expanded – but temporary – child tax credit will make that happen. I do think it will benefit low-income families a great deal and will lower child poverty rates significantly. But because of the many ways that the COVID-19 pandemic has upended life for people facing economic hardship, the earlier findings may be overly optimistic for the current moment.
It’s also important to remember that the cost of raising children varies enormously from place to place. Clearly this boost to the child tax benefit will mean different things for families in different parts of the country.
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This article was updated to indicate that President Biden signed the bill on March 11, 2021.