Child tax credit helps parents pay for important things like child care and school fees

  • In July, families began receiving advance payments of the Child Tax Credit in the form of direct deposits or monthly checks.
  • New analysis shows low-income families are using payments to cover basic expenses.
  • Biden’s $ 1.75 trillion social spending framework extends the child tax credit for just one more year.

When the Biden administration began sending monthly child tax credit checks to millions of families in July, America’s poorest parents used that extra money to cover basic expenses like school supplies. and the rent.

Two new analyzes show that families needed $ 3,600 per child aged 5 and under, or $ 3,000 per child aged 6 to 17.

Census Bureau analysis showed that checks helped families cover basic expenses, lift children out of poverty, and put food on the table.

But in Washington, Biden’s new social spending plan unveiled Thursday includes extending the expanded child tax credit for just one year, instead of until 2025 as originally planned. It also reduces the number of families eligible for advance payments.

The slimmed down $ 1.75 trillion package comes after resistance against the higher price tag from centrists like Sens. Joe Manchin and Kyrsten Sinema. In the face of party negotiations earlier this month, child tax credits were one of the first items on the chopping block.

Despite census data showing the effects of the benefit, Democrats are at risk of not getting credit for the program. A recent Morning Consult poll earlier this month found that only 47% of voters credited Democrats with implementing the program. Only 35% of voters said it should be made permanent.

Here’s how big a difference it has made so far in 2021.

The poorest families were able to cover the “bare necessities” for their children

The first month of checks alone lifted 3 million children out of poverty and fed two million, as Insider reported from previous census data.

Another new analysis, by Claire Zippel of the Center on Budget and Policy Priorities, specifically focused on households with incomes below $ 35,000. She noted that across the country, “a large majority of low-income families spend their child tax credit payments on the most basic necessities, education, or both.”

Zippel’s analysis shows that 97% of DC households in the bracket that received payments in the previous four weeks used them for basic needs and / or school-related costs. Zippel found that 59% of those surveyed used payments for food. Forty percent of households with incomes below this amount spent the child tax credit advance payments on school expenses, such as supplies and after-school programs.

The money was particularly useful for the start of the school year, as many children returned to learning in person. Almost a third of households surveyed by the Census Bureau at the end of September used the children’s tax credit on school expenses.

And, as parents returned to work, 11% of those surveyed said they used it for childcare. For parents whose youngest children are under 5, just over a quarter spent the down payments on child care.

As Insider has reported, the childcare industry suffers from a labor shortage as workers seek better wages and conditions. This further increases the costs for parents. The average annual cost of in-center care for infants up to 4 years old is around $ 10,000, according to a report by Child Care Aware of America.

But it looks like Democrats are canceling credit investments

While the expanded child tax credit has served families well, it was one of the first social safety net measures to be cut in Biden’s Build Back Better plan.

Manchin’s opposition to the price tag has led to debates over limiting the number of households that receive the credit by placing an income cap and a work requirement on eligibility. Biden’s plan on Thursday reflected exactly that. Only singles earning less than $ 75,000 and couples earning less than $ 150,000 can get monthly checks. Households above these thresholds will still receive the credit as a lump sum during tax time.

Zippel wrote that sending checks to families with the lowest incomes is crucial to keeping the majority of children out of poverty: measuring that in percentage terms, 87% of the impact of the expansion on the fight against poverty is responsible. ”

About Kristina McManus

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