The latest analysis from the Center on Poverty and Social Policy at Colombia University on the impact of the Child Tax Credit (CTC) shows that the October Child Tax Credit payments kept 3.6 million children out of poverty. While that was being released, the advocacy community, including CWLA, are having increased concerns that these same families could face a cliff in January with CTC monthly payments ending if Congress does not extend the program as included in the House version of the Build Back Better reconciliation bill.
The Columbia University Center studied the effects of the CTC through monthly tracking of rates based on race and age. They began tracking in January 2020 and have continued into October 2021. In January 2020, Black and Latino populations had the highest rates of poverty at approximately 24%. Due to the large share of Earned Income Tax Credit (EITC), CTC, and stimulus checks distributed in March 2021, Black and Latino populations reached their lowest rate; Approximately 14% for Black populations and 12% for Latinos. March also decreased the child poverty rate from 18.7% in January 2021 to 7.6%. October shows hope with an increase for recipients of the Supplemental Nutrition Assistance Program (SNAP), due to new adjustments to the Thrifty Food Plan.
The US Department of Treasury reported that CTC payments benefited many children this summer, 59.3 million children in July, and 60.9 million in August. Out of this population, the Center on Poverty and Social Policy found that October kept the greatest number of children out of poverty, following the trend throughout the year.
The first CTC payment kept 3 million children from poverty in July 2021; the second kept 3.5 million children out of poverty in August 2021; and the third CTC payment kept 3.4 million children from poverty in September 2021. The CTC also helped reduce food insecurity for low-income families with children.
While this progress in reducing child poverty is significant there is growing concern of how far these same families will fall if Congress fails to pass the Build Back Better legislation resulting in the cut-off of the monthly CTC. The Center on Budget Policy Priorities issued a recent analysis that gave these example of how some low-income families will go over the financial cliff:
- A single mother with a toddler and a daughter in second grade, who works as a home health aide helping an elderly person meet their basic needs, earns $12,500 working part-time around her kids’ schedule. Prior to the Rescue Plan, this family received a Child Tax Credit of $750 per child per year, but now they get $550 per month — a total $3,600 for the toddler and $3,000 for the second grader in 2021. If Congress fails to act by the end of the year, this family will not receive its expected $550 deposit in January and their income would take a loss of $5,100 per year.
- One spouse in a married couple earns $20,000 as a short-order cook and the other cares for their 3-year-old son and 7-year-old daughter. With the credit expansion they received the full Child Tax Credit of $3,600 for their son and $3,000 for their daughter in 2021, or $550 per month. If the current credit expansions expire, this family would receive a total credit of $2,625 — a loss of roughly $3,975 per year.
- A single mother with a 4-year-old daughter and 8-year-old son, and who is out of work due to a health condition, will receive the full Child Tax Credit of $3,600 for her daughter and $3,000 for her son to help with the children’s expenses in 2021. If the current provision making the credit fully available in 2021 expires, this family would receive no Child Tax Credit at all in 2022 — losing their monthly payment of $550 and adding to their financial insecurity.
The CTC for FY 2021 is in two parts with half going out through the monthly payments that started last July. The second half can be claimed on next years tax returns but next years returns are all but certain to get delayed. The IRS will have to delay writing up tax instructions and forms and tax refunds will then be issued later due to the late changes in the tax code that may or may not take place until late into December.