Stimulus update: Tired of the child tax credit speculation? Here are 5 things we know for sure
Do you ever log on to the internet or turn on your television and feel like you’re watching a room full of preschoolers vying for attention? It can be exhausting to get to the bottom of an issue in a world where speculation serves as information and lies intertwine with truth.
As for what we can expect from the Child tax credit moving forward, all any of us want is to know where things stand. No speculation, no guesswork, just honest answers to what we know for sure. Without further ado, here are five things we know for sure.
1. We know expanding the Child Tax Credit was huge
For eligible families, changes to the child tax credit have been massive in 2021. Here are the highlights:
- The credit has been increased to $1,600 per child, from $2,000 to a maximum of $3,600 (depending on the age of the child).
- Families did not have to wait until 2022 to receive the funds.
- From July to December, an additional $250 to $300 was deposited into bank accounts across the country for each eligible child.
- More than 61 million American children have received payments.
- About a third of the country’s children who don’t normally get the child tax credit because their families earn too little income were eligible to receive these payments because of the way President Biden’s US bailout was drafted.
2. We know it helped
From statistics collected by the Columbia University Center on Poverty and Social Policy and the US Census Bureau, we know that child tax credit payments have accomplished the following:
- monthly cut child poverty by about 30%.
- Families earning less than $35,000 a year used child tax credit funds to buy food, clothing and school supplies. They also had the money to cover the rent and pay the utility bills.
- Child tax credit payments reduce food deficiency by 26%.
- There is no evidence that child tax credit payments caused parents to quit their jobs or slow down their job search.
3. We know politics has killed credit
Initially, President Biden’s plan was for families to receive child tax credit payments for five years. It was cut to a year when it became clear Republican lawmakers refused to go along with anything that made Democrats look good in a midterm election year. Still, families that met the income thresholds were to continue to receive monthly child tax credit payments throughout 2022.
Republicans have strongly opposed the idea of continuing monthly payments, and two Democratic senators – Joe Manchin of West Virginia and Kyrsten Sinema of Arizona – have decided to reject any legislation providing more help for families with children. This, even though 1 in 5 children in West Virginia lives in poverty and the number of families in the state with an annual income below $10,000 is the fourth highest in the nation. As far as Sinema voters go, Arizona’s child poverty rate ranks 13th highest in the nation.
The last monthly payments were distributed in mid-December. By January, the national child poverty rate had risen from 12.1% to 17%. According to the Center on Poverty and Social Policy, this 41% jump in poverty among American children was due to the expiration of Child Tax Credit payments.
4. We know we haven’t heard the last one
The ongoing child tax credit payments were included in President Biden’s Build Back Better (BBB) infrastructure plan. In a victory for American families, the House of Representatives passed a version of BBB in November. It was in the Senate that BBB came to an abrupt halt.
Last month, House Majority Leader Steny Hoyer predicted that substantial portions of the BBB would find their way into law before the midterm elections in November. Although Hoyer didn’t say so, it looks like BBB may need to be broken down into smaller bills to make it through the Senate.
While we may hear whispers about child tax credit payments later this year, new payments are unlikely to ever see the light of day given the current makeup of the U.S. Senate. There’s still a lot of talk about an expansion of ObamaCare, allowing Medicare to negotiate lower drug prices for seniors, action on climate change and maybe universal early education, but the tax credit for children seems to have disappeared from the political radar.
5. We know how to foresee the worst
There is good news and bad news. The good news is that families can claim the back half of the enhanced child tax credit when they file their taxes this year. Let’s say a family has a toddler and raised $1,800 between July and December 2021 ($300 per month x 6 months = $1,800). They can still claim the remaining $1,800 when they file their 2021 tax return.
The bad news is that the total child tax credit returns to $2,000 per eligible child for the 2022 tax year. And while that helps many, millions of American children will continue to transition between the cracks.
Without facts to back it up, speculation is just rumor, and rumors do nothing for us as we plan our financial future.
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