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Giving People Money Works: What the Expanded Child Tax Credit Has Taught Us (So Far!)

Giving People Money Works: What the Expanded Child Tax Credit Has Taught Us (So Far!) from @prosperitynow
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This October, the fourth installment of the monthly Child Tax Credit (CTC) payments will be reaching millions of families. Data is showing the difference it has made in people’s lives, from reducing child poverty to helping families put food on the table. The expanded CTC has demonstrated a simple truth—giving people cash makes sense. To truly make a difference in the long term, though—especially for Black and Latinx households—the expansions to the CTC must continue beyond the end of this year. 

Much like guaranteed income, the structure of the monthly CTC lets families use the money based on their needs in a given month. For example, in a recent Household Pulse Survey from the Census Bureau, respondents reported using their CTC payments for multiple expenses, including food and childcare. After the first payment in July, there was a significant drop in food insufficiency among these same households, who also reported less difficulty paying weekly expenses. More broadly, the first CTC payment reduced child poverty, keeping three million children above the poverty line, including 1.1 million Latinx children and 543,000 Black children. 

The CTC isn’t the only government benefit that demonstrates the impact of cash payments. Several measures adopted during the COVID-19 pandemic, including stimulus checks and unemployment insurance benefits, were cash transfers that kept many households out of poverty. This is reflected in the 2020 Supplemental Poverty Measure (SPM), an alternative way of measuring poverty that accounts for post-tax income, including stimulus checks. The SPM fell from 11.8% in 2019 to 9.1% in 2020, meaning that poverty declined because of the impact of stimulus payments, despite the economic turmoil caused by the pandemic. And in its poverty projections for 2021, the Urban Institute found that the stimulus checks have had a larger anti-poverty impact than any other government benefits this year. 

It’s clear from the data that cash payments, including the CTC, work. Although the expanded tax credit has already helped families, its impact will be much greater if it is extended beyond 2021. If the provisions under the American Rescue Plan (ARP)—increasing the credit amount, expanding eligibility to 17-year-olds and making the credit fully refundable—were to become permanent, child poverty would decrease by over 40%. This translates to a child poverty rate of under 10% in nearly all states

Low-income households, especially households of color, stand to benefit the most from a permanent expansion of the CTC. Of the provisions in the ARP, making the CTC fully refundable—in other words, accessible to the lowest-income households—is the most effective at reducing poverty. And, while a permanent expansion would benefit children of all races and ethnicities, it would also reduce racial disparities. Poverty among Black children would be cut by half, while poverty among Latinx children would fall by 38%.  

The expanded CTC has already helped families by supplementing their income to help meet their and their children’s needs. Yet the expansion under the ARP leaves out one million children from immigrant families who can’t access the tax credit because they don’t have a Social Security number. If Congress doesn’t act, these and millions of other children will miss out on the poverty-reducing effects of the CTC.  

Please ask your legislators to make the expanded CTC permanent and accessible to all children in immigrant families. We know that giving people money works. Let’s continue to do so and lift families out of poverty.  

Originally posted by Prosperity Now on 2021-10-14 19:00:00

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