As monthly payments expire, future uncertain for annual child tax credit
Published 12:05 am Sunday, January 16, 2022
By Natalie Anderson
SALISBURY — Policy researchers say monthly installments of the annual child tax credit throughout 2021 have helped millions of families and children living in poverty.
The future of those payments hinges on federal lawmakers, but researchers say it’s also not the only anti-poverty tool in the toolbox.
In the American Rescue Plan Act of 2021, temporary changes were made to the annual child tax credit to assist families with child care expenses as they returned to work and sent their children back to in-person learning. The amount of the credit was increased, with eligibility expanded to low-income tax families by making it fully refundable for those who don’t earn enough to file taxes. Additionally, half of the overall credit was distributed in monthly payments from July to December.
The credit provided families with up to $300 monthly for every child younger than 5, with $250 distributed for children ages 6-17. The credit was available for families earning up to $150,000. Before then, families could claim the credit as a lump sum when they filed their taxes.
Now, the future of those monthly payments is uncertain. For the moment, changes have expired along with the monthly distributions. However, it’s one of the chief measures included in President Joe Biden’s Build Back Better agenda, which Biden has called on Democrats to revisit.
Logan Rockefeller Harris, a policy researcher at the North Carolina Budget and Tax Center, said the boosted monthly payments have affected nearly 1.2 million families in North Carolina, supporting the well-being of nearly 2 million children. Research shows the vast majority of those payments went toward housing, food, utility and educational costs for children, Harris added.
Research from the Center on Poverty & Social Policy at Columbia University estimates the October payments alone kept 3.6 million children across the country out of poverty that month. The monthly child poverty rate fell from 15.8% in June 2021 to 11.9% in July 2021, the month those regular payments began. Additional research from the school showed a nearly 25% reduction in food insecurity among low-income families.
Overall, Harris said the expansion is a “very clear, very effective way to reduce family poverty and reduce childhood poverty,” particularly because it’s the most direct way of sending assistance to families. No action to keep the expanded credits that made payments more generous, she added, can be detrimental to the families who need the assistance and no longer qualify for a fully refundable credit if they make too little to file taxes.
“It’s estimated that with the payments stopping, there’s a potential for about 300,000 children to fall back into poverty or deeper into poverty,” she said. “Especially with omicron surging and a lot of families not having access to paid leave at their jobs, it’s really sort of a tragedy for these payments to be ending at this time. And we’re very much hoping to see, and will be advocating for, the federal government to continue this policy, which has been very effective.”
Kannapolis resident Julie Waitt, a parent to 7-year-old and 13-year-old children, said the payments helped with bills and groceries and other child care and home needs. Waitt likes the idea of claiming half as monthly installments, but she added she’s curious to know how much it impacts the lump sum she normally claims on her taxes.
Salisbury resident Dan Doiron, who has a 14-year-old child, said he received the $250 monthly payments but they didn’t help much with child care costs. He said the lump sum claimed at tax time is sufficient.
“I personally used the lump sum to fortify my children’s college savings account,” Doiron said.
Harris said the monthly installments may be particularly important for lower-income families, who can use those monthly boosts to cover their regular expenses.
“It really makes a different to have income that comes in regularly,” Harris said. “It can much harder to plan for regular expenses when you just get a chunk of money once a year.”
Child tax credit expansion, however, is just one tool in the toolbox, Harris said. Though North Carolina lawmakers could enact their own policies related to the tax credit, they can also re-enact the earned income tax credit the Republican majority eliminated in 2014.
A total of 30 states offer the earned income tax credit. The National Conference of State Legislatures estimates the average amount received from the earned income tax credit per tax filer was $2,476 during the 2019 tax year.
State Rep. Harry Warren, a Republican who has represented Rowan County over the last decade, said his office hasn’t received any calls related to the child tax credit. He credited Republicans with ongoing tax reform that has spurred economic growth for the state, including the increased standard deduction for the personal income tax implemented in the 2021-23 budget, which he says has “yielded greater savings for working class individuals.”
“The results of the 2013 tax reforms and the reforms that have followed since then have proven to be beneficial to all North Carolinians across the board,” Warren said.
Warren said it’s incumbent upon lawmakers to always consider revisiting decisions they made in the past because conditions change.
Throughout January 2021, Data for Progress conducted a survey among 1,968 likely North Carolina voters and found that 78% indicated support for reinstating the earned income tax credit in North Carolina. The survey examined attitudes on a range of policies ranging from corporate tax rates, funding for early education and child care assistance and restoring bargaining rights to public-sector workers.
The rates of support were fairly similar between men and women, and among rural, suburban and urban voters. A total of 16% opposed, with the greatest opposition among rural voters.
“We know from the data that this is improving families’ lives in measurable ways. It’s meaning that they have the money to put food on the table, to pay their bills, to pay for their kids’ educational costs,” Harris said. “It would really be a shame not to continue what is a really effective policy that is going to make lives better for our families and communities in North Carolina.”
Contact reporter Natalie Anderson at 704-797-4246.