During the last half of 2021, the American Rescue Plan implemented by the Biden Administration included a temporary expansion of the Child Tax Credit which brought a higher per-child credit that was available for monthly payments in advance for qualifying families. Respectively, the Child Tax Credit was temporarily increased from $2000 per child to $3600 for children under the age of 6 or $3000 for children up to age 17. The purpose of this tax credit in payment form was to alleviate the financial stress that families endured as Covid-19 continued to drag on; ideally these payments would help pay the bills, pay for childcare so parents could work, offset unemployment shortcomings, and provide for other essentials that families may have struggled to attain.
Though the idea of providing the family-targeted benefit was arguably a noble one, the topic has become widely controversial depending on the audience surveyed. To get an idea of what people in different social circles thought about the expanded Child Tax Credit, for this article three different participants were interviewed to provide a broad view of the subject. Joe, a 71-year-old retired fireman, provided a perspective as someone who didn’t receive the tax credit benefit and only observed its impact on others. Jodine, a 52-year-old Master’s-degree holding mother of both adult and teenage children, shared the perspective of someone who received the expanded tax credit but had an experienced outlook on the arrangement. Finally, Elizabeth, a currently unemployed 30-year-old single mother of a second grader, provided the perspective from the demographic most likely in need of the expanded advance tax credit payments.
When questioned about their understanding of what the expanded Child Tax Credit was supposed to accomplish, each of the interview participants reported exactly what the government’s memo had said: to help offset economic difficulties and help struggling families the way the government was most concerned that they needed it. When asked if they thought people used the tax credits the way the government intended, the answers began to vary. Although the U.S. Census Bureau reports that about 25% of recipients used the money for childcare expenses, Elizabeth laughed at the idea of the money making any real difference in that regard. “Have you seen what childcare costs right now? $250 a month doesn’t even make a dent in what I’d have to pay,” she retorted when asked. She did add, however, that it helped cover back to school expenses in August, but that was the closest she came to using it as the administration suggested. Joe and Jodine both thought that while some people probably did use the payments as intended, the majority probably did not.
The participants were also asked if they knew the income thresholds that allowed families to qualify for the expanded Child Tax Credit, and none of the three did. Jodine and Elizabeth both said their income was low enough they knew they would qualify, so beyond that they didn’t pay close attention. Joe simply responded, “It didn’t affect me since I don’t have any kids to claim anymore, so I never cared to look.” For the record, the income limits to take advantage of the expanded tax credit benefit was $75,000 a year for single filers, $150,000 for married filers, and was based on the reported income from the 2020 tax year. It’s worth noting, however, that these thresholds were not strict cut off points, and families with income above these limits received increasingly scaled down benefits proportional to their additional income.
Surprisingly, all three of the people interviewed felt that the expansion of the Child Tax Credit, while temporarily helpful, didn’t make a significant difference in the long run. Joe expressed concern that people who needed the money most might have gotten used to receiving it, and therefore would be worse off with it expiring at the beginning of the year. This assessment seemed accurate, as Elizabeth reported similar feelings as the payments came to an end. “The money helped me be able to do extra things with my little girl, outings we usually couldn’t afford. It’s hard explaining to a second grader why that money is suddenly gone,” she said. “It did help for a bit, but I don’t know… I kind of wish it didn’t happen, it’s hard to adjust back to not having it now.” Other families, such as Jodine’s, kept in mind that the monthly payments were temporary and would likely cut some out of their next tax refund, so they carefully dedicated its use to the same purpose as they would have used those refunds. “We usually use our tax refund to help us float throughout the year with extra expenses,” she said. “We figured that our upcoming tax refund would be affected, so we chose to save the payments for those same purposes and didn’t view it as ‘free money’ we could just spend.”
When the participants were asked what percentage of U.S. families they estimated were eligible to receive the expanded Child Tax Credit, the responses were varied. Both Joe and Jodine weren’t certain but guessed that approximately 30-50% of all U.S. families were eligible for the advance payments. Elizabeth assumed that only the neediest of families received the payments. “They [the payments] probably only went to about 25% of families, but I’m really not sure,” she said. All these guesses, as it turns out, were quite low; according to the Treasury Department, a staggering 88% of all U.S. families with children, or 39 million households, received the expanded tax credit in 2021 in either full or scaled back amounts.
There has been much discussion about extending the expanded Child Tax Credit for another year or up to 10 years, which was the source of the disagreement in the Senate that led Senator Joe Manchin to deal a death blow to President Biden’s Build Back Better Act in December of 2021. As the final data-related question, the interview participants were asked what they thought the annual price tag for the expanded tax credit would be if it were extended in its previous form. Each participant had a similar response: a couple billion or several billion dollars a year. Again, the actual figure estimated by the Congressional Budget Office is quite a bit higher at an annual cost of $185 billion a year, or $1.6 trillion over the next decade. As a final question, the participants were asked for their own opinions on extending the tax credit in the future, as has been suggested by many in Congress. “I think it would be a good idea, if I could count on it for a longer time it would really help me out,” was Elizabeth’s optimistic response. Jodine’s point of view was more hesitant: “I’m a little concerned about how this much money being pumped into the economy is fueling inflation, so I’m really not sure if continuing it is a good idea.” Joe was more in the middle, and favored continuation under certain conditions. “I support my tax dollars going to benefit the well-being of children in need, but if it continued I think it needs to be worked to where it doesn’t give money to those who don’t need it. I’m worried right now it would do that,” he said.
There is obviously no cut and dry answer to the question of exactly how useful the expanded Child Tax Credit program was for those who were included, as there are pros and cons for each side of the argument. It may be the case that it served its purpose during the time it was needed, and there is no need for an extension. However, if the program were renewed for an additional length of time, if would likely make sense to pare down on who was eligible to receive the benefit to target the neediest of families more directly. It’s also worth examining if the struggles that the neediest families face are effectively addressed by this solution, or if as the country moves past the lockdown stages of the pandemic there may be a better way to help these families get ahead. Regardless of what the future for this program may look like, the data available after the six months of payments provides useful information that future legislation can draw on to make decisions on how best to help American citizens who need a helping hand.
Economic Security Project. FAQ: How the monthly CTC will impact your family. Washington, DC. Economic Security Project, July 21 2021. https://www.economicsecurityproject.org/wp-content/uploads/2021/07/FAQ-CTC-Impacts-on-Families.pdf
NCLS. Child Tax Credit Overview. Washington, DC. National Conference of State Legislatures, February 1 2022, https://www.ncsl.org/research/human-services/child-tax-credit-overview.aspx
Perez-Lopez, D. Household Pulse Survey Collected Responses Just Before and Just After the Arrival of the First CTC Checks. Washington, DC. United States Census Bureau, August 11 2021. https://www.census.gov/library/stories/2021/08/economic-hardship-declined-in-households-with-children-as-child-tax-credit-payments-arrived.html
Perez-Lopez, D. and Mayol-Garcia, Y. Parents With Young Children Used Child Tax Credit Payments for Child Care. Washington, DC. United States Census Bureau, October 26 2021. https://www.census.gov/library/stories/2021/10/nearly-a-third-of-parents-spent-child-tax-credit-on-school-expenses.html
Yokley, E. Voters Are Divided Over One-Year Extension of Expanded Child Tax Credit. Washington, DC. Morning Consult, December 20 2021. https://morningconsult.com/2021/12/20/child-tax-credit-support-poll-build-back-better/