Stimulus Update: Tired of Child Tax Credit Speculation? Here Are 5 Things We Know for Sure
- The Child Tax Credit has reverted to its former shape and size.
- Political infighting is at the heart of ending monthly payments.
Living in reality is the only way to plan for the future.
Do you ever log on to the internet or turn on your television and feel as though 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 are mixed in with the truth.
When it comes to what we can expect from the Child Tax Credit moving forward, all any of us want is a sense of where things stand. No speculation, no guessing, just honest answers to what we know for certain. Without further ado, here are five things we know for sure.
1. We know the expanded Child Tax Credit was huge
For qualifying families, the changes to the Child Tax Credit were massive in 2021. Here are the highlights:
- The credit was increased by up to $1,600 per child -- from $2,000 to a max of $3,600 (depending on the age of the child).
- Families did not have to wait until 2022 to receive the funds.
- From July through December, an extra $250 to $300 was deposited into bank accounts across the country for each eligible child.
- More than 61 million American children received payments.
- Roughly one-third of the nation's children who normally do not benefit from Child Tax Credit because their families earn too little income were eligible to receive these payments because of how President Biden's American Rescue Plan was written.
2. We know it helped
Based on statistics gathered by Columbia University Center on Poverty and Social Policy and the U.S. Census Bureau, we know Child Tax Credit payments accomplished the following:
- Cut monthly child poverty by around 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 utility bills.
- Child Tax Credit payments cut food insufficiency by 26%.
- There is no evidence to show that Child Tax Credit payments inspired parents to quit work or slow their job search.
3. We know politics killed the credit
Initially, President Biden's plan was for families to receive Child Tax Credit payments for five years. It was cut to one year when it became clear that Republican lawmakers refused to go along with anything that made Democrats look good in a midterm election year. Still, families who met the income thresholds were expected to continue to receive monthly Child Tax Credit payments throughout the entirety of 2022.
Republicans were vocally against the idea of continuing monthly payments, and two Democratic senators -- Joe Manchin of West Virginia and Kyrsten Sinema of Arizona -- decided to vote down any legislation that included more assistance to families with children. This, even though 1 out of every 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 country. As for Sinema's constituents, Arizona's child poverty rate ranks 13th highest in the nation.
The final monthly payments were distributed in mid-December. By January, the child poverty rate nationwide had increased 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 that we haven't heard the last
Continued Child Tax Credit payments were included in President Biden's Build Back Better (BBB) infrastructure plan. In a win for American families, the House of Representatives passed a version of BBB in November. It was in the Senate that BBB came to a crashing halt.
Last month, House Majority Leader Steny Hoyer predicted that substantial portions of BBB will find their way into law before the midterm elections in November. While Hoyer did not say so, it appears that BBB may have to be broken down into smaller bills to make it through the Senate.
While we may hear murmurs about Child Tax Credit payments later this year, it is doubtful that renewed payments will ever see the light of day given the current makeup of the U.S. Senate. There's still plenty of talk about an ObamaCare expansion, empowering Medicare to negotiate lower drug prices for seniors, climate change action, and possibly universal early education, but Child Tax Credit appears to have disappeared off of the political radar.
5. We know to plan for the worst
There's 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 taxes this year. Say a family has a toddler and collected $1,800 between July and December 2021 ($300 per month x 6 months = $1,800). They can still claim the other $1,800 when they file their 2021 tax return.
The bad news is that the total Child Tax Credit reverts to $2,000 per eligible child for the 2022 tax year. And while that's helpful for many, millions of American children will continue to fall between the cracks.
Without facts to back it up, speculation is nothing but a rumor, and rumors do nothing for us as we plan our financial futures.
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