Child Tax Credit Payments at Current Levels Could Address Economic Inequalities and Strengthen Our Economy
The COVID-19 pandemic and unprecedented nationwide protests against racial inequalities in 2020 have highlighted the systemic racism ingrained in our country’s policies and institutions. The child tax credit is a prime example. From its enactment in 1997 until this year, the child tax credit, which was specifically intended to help families in difficulty, excluded 50% of black children in this country (compared to only 20 percent of white children) because their family incomes were too low. This statistic should stop us all in our tracks.
As Congress continues to debate one of the most important pieces of legislation of our lives – a nearly $ 2 trillion “reconciliation” bill that would increase funding for child care, health and education among many other lagging structural supports for our economy – we need to push for an extension of the child tax credit beyond 2022 and make it permanent. This is a crucial opportunity not only to create an infrastructure that supports historic and long-term sustainable economic growth, but also helps close the racial wealth gap.
For the first time since its passage, the child tax credit included a temporary increase and refund provision that made it fully accessible to families whose incomes are too low to pay federal income tax and distributed these payments periodically, instead of just once a year during tax season. This policy change helped prevent millions of families from sliding into poverty during the pandemic and allowed working parents to start saving to offset future economic downturns.
Congress is currently debating whether to make these temporary changes permanent, which Columbia University researchers estimate Would reduce the poverty rate for black children by more than 50 percent and for all children by 45 percent. This would lift 4.5 million children above the poverty line and provide important long-term benefits for children’s educational progress, health and future incomes as adults.
We are already seeing significant gains from the temporarily expanded child tax credit. Within the first month following the issuance of the initial payment, the the number of households with children reporting that they did not have enough to eat decreased by 3.3 million or nearly a third. By stimulating the consumption of goods and services by households and stimulating economic activity in local communities, the impact of the child tax credit has extended far beyond households with children and those in need. of poverty.
It is estimated that over the next 12 months, the expansion of the child tax credit increase consumer spending by $ 27 billion, generating $ 1.9 billion in state and local sales tax revenue, and supporting more than 500,000 full-time median-wage jobs.
A question at the heart of the current debate in Congress – that making the expanded child tax credit permanent could discourage parents from working – is unfounded. More … than 400 economists recently signed a letter of support to make the expanded availability permanent, explaining that “recent empirical studies suggest that the income provided by the program is unlikely to significantly reduce the supply of parental labor.” Indeed, according to a new study from Humanity Forward, 94 percent of child tax credit recipients said they plan to continue working or even work overtime, as they would be able to pay for child care and other expenses related to the child. education of children. Likewise, the The National Academy of Sciences has predicted that 99.5% of working parents who receive the child tax credit would continue to work.
Beyond a tool to fight poverty, the expanded child tax credit has the power to put millions of black families on the path to long-term economic and social mobility. By making it permanently fully refundable at current levels – $ 3,600 per child for children under five and $ 3,000 per child for children 6 to 17 – the child tax credit would generate an increase of $ 76 billion in future income for children in adulthood and nearly $ 536 billion in increased benefits caused by improved health outcomes for children. This type of economic mobility benefits the entire national economy – the The current and future value of $ 800 billion of this tax credit to the corporation is approximately eight times the original cost of $ 100 billion.. It is rare for a public policy to obtain such a high return on investment.
We have a unique opportunity to lift 4.5 million children out of poverty and repair structural damage to the U.S. economy by correcting a provision in our tax code that has consistently kept black families from thriving for decades. Congress should make the expanded, fully refundable child tax credit permanent and continue to distribute these payments periodically. There should be no debate.
David Clunie is the Executive Director of the Black Economic Alliance. Samantha Tweedy is President of the Black Economic Alliance Foundation.