Ending Monthly Child Tax Credits Pushed 3 Million Kids Into Poverty

(Bloomberg) -- The monthly tax-credit payments handed out by President Joe Biden’s rescue plan lifted millions of children out of poverty. Now their disappearance is sending them back.

Many American families are struggling to pay for basic necessities and over 3 million kids have been pushed below the poverty line, according to two new reports released this week. 

The monthly child poverty rate increased to 17% in January, from 12.1% in December — when the last of the advance payments went out, according to a study released Thursday by the Columbia University Center on Poverty and Social Policy. That’s the highest level since the group began tracking it at the start of 2020, when it was 18.7%.

In a separate report released Tuesday by the savings platform SaverLife, roughly a third of 800 parents surveyed in December said they would have a much harder time paying utility bills if the payments didn’t continue. Some parents, burdened by  inflation at the highest level in decades, have already been squeezed without the monthly cash infusions. About one in five respondents in an early February survey said they could no longer afford enough food for their kids or their housing without the payments, according to advocacy group ParentsTogether Action.

“The Child Tax Credit helped families meet their daily needs, and really put food on the table and a roof over people’s heads,” said Radha Seshagiri, director of public policy and systems change at SaverLife, a nonprofit platform that helps people build savings.

The monthly payments of up to $300 per child were a temporary advance on tax refunds. Biden’s stalled Build Back Better plan would have extended the monthly installments into this year. U.S. Census Bureau data shows that most families used the cash for food, rent utilities and to pay off debt.

Parents can still get the rest of the credit at tax-time, up to $1,800 per child for the second half. That will float some for a while, but research indicates that that boon typically runs out by the spring.

Since Columbia researchers began tracking the data in 2020, the third month of the year— when many families get their tax refunds — saw the lowest child poverty rates, with a jump right afterward in April. 

Brittany Baker, a mom of four from Dayton, Ohio, says the $900 in monthly payments she was getting last year helped her pay for basic needs, such as clothes and bills, after she was furloughed from her hospital job in early 2021. She said she and her kids have been staying with their grandfather after falling behind on rent while she was out of work and that restarting the payments would help her save to get her own home.

“I would use those payments to save, to get us a new place,” she said. “It really would be used in a great way.”

In a January survey of over 150 people, 85% said they’d prefer payments to remain monthly as opposed to one lump sum, according to SaverLife. “As I talk to people, they say daily needs have been consistent and increasing, and the monthly payment really helps with those needs,” Seshagiri said. 

After tax season ends, “it is likely that monthly child poverty rates could be persistently high through the rest of 2022 absent the continuation of an expanded child tax credit, further policy interventions, or strong improvements in labor market outcomes,” the Columbia researchers wrote in the report.

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