Saturday, July 17, 2021

Can Biden’s child tax credit really cut child poverty in half?


Mike Bebernes
·Senior Editor
Sat, July 17, 2021, 

What’s happening

More than 35 million American families were sent checks of up to $300 per child on Thursday as the new expanded child tax credit went into effect. Roughly $15 billion was disbursed to the families of nearly 60 million children as part of this first wave of checks, which will be sent monthly through at least the end of the year.

Passed by Democrats in March as part of the $1.9 trillion American Rescue Plan, the new program increases the size of the existing child tax credit — from $2,000 per child to $3,600 for younger children and $3,000 for older kids — and expands eligibility so even families with no income can receive the benefit. It also allows families to receive their payments in monthly installments, rather than one lump sum at the end of the year.

The details of how the new child tax credit affects the tax code are complicated, but the end result is simple: About 90 percent of American families with children will receive what is essentially a monthly child allowance, a policy that exists in most rich countries but has never before been tried in the U.S.

President Biden has called the new program “transformative” and predicted it will “spur the largest-ever one-year decrease in child poverty in American history.” The White House has touted research that suggests the monthly payments could cut child poverty in half if they’re made permanent. The stimulus bill authorized the expanded credit only through the end of 2021, but Democrats are hoping to extend the program.

Why there’s debate

A number of economists and anti-poverty advocates believe that the new child tax credit could be just as impactful as the president predicts. Many praised the simplicity of the plan, which strips the arcane eligibility rules, spending restrictions and complicated enrollment process that can leave many needy people out of existing public assistance programs in favor of automatic direct cash payments. The promise of a monthly financial boost, they argue, will free millions of poor families from the constant struggle to put food on the table and give them the ability to rise up out of poverty.

Some critics, meanwhile, have framed the tax credit as just a repackaged version of welfare that they say will make Americans dependent on the government. They argue that the comfort of regular checks from the IRS will lead some people to leave the workforce, which will prevent them from advancing in their careers to a point where they can support themselves and their families. Others worry about the cost of the program and say it should be targeted so only the neediest families receive the benefits.

There are also concerns among those who support the tax credit in principle but worry that it may fall short of its potential unless what they see as fatal flaws in how it’s being carried out are fixed. The most glaring issue, they argue, is making sure the money gets to those who need it most. Using tax return information, checks are currently being automatically sent to any eligible families. But many of the poorest Americans don’t file taxes, meaning they’ll have to sign up on their own — using an online portal that may be inaccessible to many — or risk missing out. Other pundits are holding off on celebrating the child tax credit until it’s made permanent, a step that’s far from a sure thing given the gridlock in Congress.

What’s next

Democrats are hoping to include an extension of the child tax credit as part of the $3.5 trillion budget proposal they unveiled earlier this week. Negotiations over the details of that plan are ongoing, though the tax credit does not appear to be one of the more contentious issues under discussion.
Perspectives
Supporters

The money will dramatically reduce poverty in the U.S.

“Poverty is a political choice, not an inevitability. Joblessness, caregiving responsibilities, single parenthood, and other common life events only put children at risk of economic instability because U.S. policy allows it. The new monthly payments demonstrate how the U.S. government can support its people by immediately helping families and children contend with uncertainty, emergencies, and all too common financial ups and downs.” — Areeba Haider and Galen Hendricks, The Hill

Monthly installments are much more impactful than a single annual payment

“[Paying] families monthly, instead of one lump sum ... will provide parents with more stability knowing when cash is coming for diapers, rent and other basics.” — Deepak Bhargava and Dorian Warren, USA Today

The checks will boost the number of working parents, not reduce it

“We must recognize that what keeps many Americans out of the workforce is not the prospect of a child allowance but the barriers of extreme poverty, the costs of child care, disability, past criminal justice problems, addiction and mental or physical health issues. Affirmative help to empower more Americans to overcome these barriers is far more likely to increase work than keeping their children in poverty as a punitive stick.” — Former National Economic Council Director Gene Sperling, Politico

The tax credit reverses decades of harmful small-government policies

“For those of us working in economic policy, this is nothing short of revolutionary. ... It is a major step forward to leave the punitive welfare system of the past four decades in the past, and instead embrace the simplicity and efficacy of unconditional cash.” — Aisha Nyandoro and Natalie Foster, MarketWatch

The tax credit removes barriers that prevent needy people from getting help

“Unlike with other anti-poverty programs, nearly all eligible families will be automatically enrolled. If your most recent tax return shows your income is below a certain threshold and you have children, voilĂ . You get the money. ... The payments also come with no strings attached — no requirements to document work hours or assets, or sit through humiliating interviews to plead deservingness.” — Catherine Rampell, Washington Post
Skeptics

Any benefits will disappear if the program is allowed to expire

“Time is running out. There are only six months until monthly payments of the credit cease, and Congress has a busy docket in the meantime. If it wants to avoid a completely preventable spike in child poverty — because that is what is in store once this expanded benefit expires — it has to act quickly to extend the credit.” — Dylan Matthews, Vox

Government handouts are a path to permanent poverty

“While the Left claims that these child allowances (read: welfare checks) will improve the lives of low-income families, the opposite will happen. More parents will disappear from the workforce, and more children will be locked into dependency. Democrats should stand against government programs that prevent people from achieving their full potential and experiencing the power of work.” — Robin Walker, Washington Examiner

The middle class, not the poor, will reap the most benefits

“Society has a special obligation to the poor, and fighting poverty is a worthy use of public funds. But the amount of financial assistance Biden wants to give to better-off households is excessive. It would be better to use much of that money to expand economic opportunity or to reduce the deficit.” — Michael R. Strain, Bloomberg

Many of the most vulnerable American families will miss out

“For the money to do any good, though, it needs to end up in families’ mailboxes, bank accounts, and wallets. While the child tax credit will do that more simply and automatically than many other safety-net programs, it still stands likely to leave millions of families — disproportionately the poorest and most fragile ones — behind.” — Annie Lowrey, Atlantic

Borrowing money to pay for entitlement programs will cause great harm down the road

“Improving the safety net is one thing, but spending more than $1 trillion on mainly middle-class entitlements and financing this expenditure with debt robs future generations while enriching today’s.” — John F. Cogan and Daniel L. Heil, Wall Street Journal

A real child allowance, rather than a tax credit scheme, would be much more effective

“Democrats should consider scrapping these tax credit programs altogether in favor of a universal child benefit program that would pay a flat monthly sum to all households for every child they care for.” — Matt Bruenig, New York Times


360@yahoonews.com.



No comments:

Post a Comment