The Biden administration has a plan that is estimated to cut child poverty in half. And it’s already in place.
It’s called the Child Tax Credit.
Here’s how it works. Parents of children aged 6 and younger across the country are receiving direct payments of up to $300 per month per child, or $3,600 per year per child. The payments drop to $250 a month for children between the ages of 6 and 17, and phase out for families with higher incomes.
It’s a historic expansion of the original credit that’s already helping millions of working families.
The direct payments are coming because the Child Tax Credit is a refundable tax credit. Normal, non-refundable tax credits simply cut your taxes. But a refundable tax credit, like the Child Tax Credit, helps you even if you don’t earn enough for it to reduce your taxes — so it’s a direct payment to you.
Say you owe $3,000 in taxes. A non-refundable tax credit of $3,600 won’t be worth $3,600 to you. It would just reduce your taxes to zero. So you wouldn’t get the full benefit. And if you don’t owe any taxes to begin with, a non-refundable tax credit wouldn’t do you any good at all since you can’t reduce your taxes to less than zero dollars.
But a refundable tax credit would help you. You’d get the money no matter what, the full $3,600. That’s why this expansion is such a big deal: it ensures that the money gets to lower-income families.
The early results show that this policy is a game-changer. Over 3 million more households with children now report having enough to eat after just the first two payments. More report being able to make rent, stay in their homes, and afford basic necessities. And 3 million children have been lifted out of poverty.
It’s reduced racial disparities, as well. Hunger has fallen by one-third among Latinx families and by one-quarter among Black families.
It bears repeating that if the credit is made permanent, and reaches everyone it should, it could cut child poverty in half.
Yet the Republican Party — the so-called “party of family values” — is dead set against it. That’s because the program works.
Every single Republican in Congress voted against the American Rescue Plan, which contained the initial expansion of the Child Tax Credit. You can bet they’re all going to vote against making that expansion permanent as part of the Democrats’ $3.5 trillion budget plan. It’s obvious: they do not care about helping working families.
Democrats must get this done, no matter how staunch the Republican opposition. In the richest country in the world, it is inexcusable that millions of our children are living in poverty.
For decades, almost all economic gains have gone to the top, leaving working families behind. This historic expansion of the Child Tax Credit is a crucial step towards righting this wrong.
Poverty is a policy choice. Congress must make the Child Tax Credit permanent.