Stimulus Update: 6 Stats That Show How Badly the Boosted Child Tax Credit Is Needed
The boosted credit is in limbo as lawmakers stall over Biden's spending package.
- President Biden was hoping to extend the enhanced Child Tax Credit into 2022.
- If that doesn't happen, it could be financially devastating for millions of families.
In March of 2021, lawmakers passed a massive relief bill that not only sent stimulus checks into Americans' bank accounts, but also expanded the Child Tax Credit. Not only did the value of the credit increase, but half of it was made available to recipients in the form of monthly installment payments that went out between July and December.
President Biden had every intention of keeping the boosted Child Tax Credit in place for 2022, and he wrote legislation to that effect into his Build Back Better plan. But that plan has yet to pass a Senate vote, and now, it's looking less likely that the boosted Child Tax Credit will stick around for 2022.
Unfortunately, that could put many Americans in a tough financial position, despite a stronger economy than we had last year. Here are a few statistics that highlight the need to keep the enhanced Child Tax Credit around for at least one more year.
1. The boosted credit reached more than 61 million children in December
That's not a small number. And those payments also came at a time when inflation reached its highest level in nearly 40 years. Right now, many families are struggling with higher living costs. Not having monthly payments to help offset them could force many households into debt.
2. The boosted credit will have given the average household $4,380 for 2021
Between payments already received in 2021 and additional funds claimed on 2021 tax returns, which the IRS recently started accepting, the average Child Tax Credit recipient will end up with $4,380 thanks to the enhancement that was put into place for 2021. That's a lot higher than the $2,310 the average household received under the previous version of the credit.
3. The credit cut child poverty by about 30%
That's a sizable percentage. And the problem is that if the boosted credit is pulled for 2022, we could see much of that progress reverse itself, lending to higher child poverty rates this year.
4. The expansion made at least 23 million more children eligible
Prior to 2021, there were income requirements associated with the Child Tax Credit, which meant many families didn't qualify for it. Last year, an estimated 23 million more children were able to benefit from the credit because those requirements were waived.
5. Families earning less than $35,000 used their payments for basic needs
While some households may have used their boosted Child Tax Credit payments to pad their savings or meet other financial goals, many families used that money to cover essential needs like rent, utility bills, food, and clothing. If the boosted credit is pulled this year, many households might fall behind given that living costs have risen so substantially.
6. The boosted credit cut food insufficiency by 26%
Food insecurity is an issue that many households face. Last year, the boosted Child Tax Credit reduced the rate of food insufficiency by 26%. And while the issue of food insecurity may now be somewhat mitigated by a general return to in-person school, that doesn't come close to completely solving the problem.
It's clear that the boosted Child Tax Credit did a lot of good for millions of families. With any luck, lawmakers will continue to fight to keep the enhanced version around this year to avoid the many repercussions that might ensue if families are deprived of that financial lifeline.
Alert: highest cash back card we've seen now has 0% intro APR until 2024
If you're using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.