Before last year’s changes to the child tax credit, the parents of 23 million children received either a partial credit or none at all, because their earnings were too low to qualify for the full credit. This left out or shortchanged about half of Black and Latino children, half of children in rural areas, and almost one in four white children. The families who needed the credit the most received the least.
Changes to the credit kept an estimated 3.7 million children out of poverty at the end of last year, and its expiration in January caused child poverty to rise 41 percent, according to research by Columbia University’s Center on Poverty and Social Policy. Low-income families used the expanded credit to pay for rent and utilities, buy food, and support their children’s education.
In permanent legislation that includes deficit reduction, it will most likely be too costly to include a full Rescue Plan expansion of the credit. But even a partial increase would help. The most critical step, where benefits to families and society far exceed the comparatively low costs, is permanently making the entire credit available to the lowest income children. For example, just making the current $2,000 credit refundable would reduce child poverty by roughly 20 percent. Refundability is the most consequential way to reduce child poverty, and we urge lawmakers to make it permanent.
The loss of refundability from the expiration of the Rescue Plan comes at a particularly tough time: With prices for food, gas, and other necessities rising, families with low incomes are feeling pressure. Taking action now to restore a fully refundable monthly credit would make a big difference.
The American Rescue Plan also provided new, temporary funds to help shore up the nation’s child care system. Many child care providers, largely small businesses, suffered serious losses during the pandemic and had to shut down. Strengthening child care and helping families afford its high cost are critical to family budgets and our economy. The temporary help is working, but we need a longer-term investment to lower child care costs and make sure children are well cared for while their parents work.