The Child Tax Credit Is Ending Just as Inflation Hits New Highs
(Bloomberg) -- The looming expiration of President Joe Biden’s child tax credit will have a lasting negative impact on many American families, with millions of children at risk of slipping back into poverty, according to research from the Center on Budget and Policy Priorities.
The last of six monthly payments, up to $300 per child, is scheduled to hit bank accounts on Wednesday. If not renewed in the new year, the financial hit will come just as inflation approaches highs not seen in decades.
“It’s more important than ever right now with rising costs for everything from food and gas to childcare,” said Arloc Sherman, vice president for data analysis and research at CPBB, a nonpartisan research institute. “Families are getting squeezed harder. This is high stakes.” The payments have especially benefited families of color and those living in rural areas, according to Sherman.
Before this year, the U.S. was the only rich nation that didn't give a regular payment to low- and middle-income families to help with the costs of raising children. After the first installment of the child tax credit hit in July, food insecurity and economic hardship for many American families declined and child poverty fell by more than 40%, according to the Center on Poverty & Social Policy at Columbia University. Absent an extension of the benefit, about 10 million kids are at risk of falling back below or deeper into poverty — affecting Black, Latino and Indigenous populations most.
The tax credit is set to expire on December 31. The current version of the Build Back Better act currently being negotiated in Congress extends the payments through 2022 for most families. The lowest-income families would continue receiving the benefit permanently. The bill has already been passed by the U.S. House of Representatives, but is stalled in the Senate as members negotiate a number of items, including the child tax credit. It is unlikely to pass by Majority Leader Chuck Schumer's self-imposed Christmas deadline.
Initial data shows people have used their tax credits for necessities like food, clothing, shelter and utilities, and the lowest income families have been using the cash pay off debt. About a third of households used the money for school expenses, and one in four families with young kids used it to cover child-care costs, according to the U.S. Census Bureau.
In a recent ParentsTogether Action survey, 36% of parents said they would no longer be able to meet their family’s basic needs if the payments disappeared. Roughly a third of respondents said they would no longer be able to afford enough food for their kids, or their rent or mortgage. Researchers surveyed 1,000 people, but not all answered every question.
“It’s safe to say that families are struggling and living paycheck to paycheck and if this goes away, the immediate impact will be felt,” Allison Johnson, a campaign director with ParentsTogether Action, said. “Even if it was $250 a month, it was making a huge difference for folks.”
Doyle Franklin, a father of three living in Corvallis, Oregon said the monthly payments have helped his family cover rent and the cost of medications for the kids. His social security benefits had been cut and earlier this year, his wife lost her job.
“If this goes away, it will be a strain trying to raise a household with just $700 a month,” he said. “It’s going to really put us in a bind. I can do without, but my kids can’t.”
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