The Child Tax Credit stimulus payments were originally designed to reduce child poverty and income instability, which was more pronounced among families with children in America. But the $2,000 annually that is given to each child has proved insufficient in the present situation.
The economic downturn that was the inevitable outcome of the pandemic led to millions of Americans losing their source of income. With the economy in the grip of a prolonged shutdown, the amount was no longer sufficient for a child to last them through the year.
Within weeks of coming to power, President Biden signed the American Rescue Plan Act in March 2021. Other than the third stimulus checks and additional support to organizations and businesses, the Rescue Plan also made provisions for the expanded Child Tax Credit stimulus check.
The annual amount per child jumped from $2,000 to between $3,000 and $3,600. The increase in the annual amount per child was not the only change in the new version of the Child Tax Credit payments. The amount was given in the tax year as an advance for the first time.
One-half of the payments were given as monthly stimulus checks between July and December 2021.
The balance payments went out in the tax filing year, which was 2022 in this case. While signing the Rescue Plan, President Biden and the Democrat Congressmen had envisioned that the Child Tax Credit would automatically be extended, at least through 2025 if not made into a permanent feature. But despite the unprecedented success of the expanded Child Tax Credit payments and the immense popularity it enjoyed, it died a quiet death.
The child poverty rate fell by an unprecedented 50% in the year the CTC payments were given in its expanded form. But the picture changed again the very next year. The child poverty rate is back to its earlier figures and the situation remains grim, particularly among families with young children.
Child poverty in America is much higher than in other developed nations in Europe and Asia. This abysmal rate is not just the result of a temporary labor market condition or mere demographics. The abysmal condition is a result of the policy choices that the federal administration has made over the years.
It is worth noting that the main benefits of two large policies that have provided substantial income for families are based on the federal income tax system.
Till the expanded Child Tax Credit was introduced, the poor had totally missed out on the payments as the CTC payments were linked to filing income tax. The payment went out as a deduction or tax rebate against income tax returns. So families that did not file income tax returns failed to get any part of the stimulus checks.
America Has Made Significant Progress On The Child Tax Credit
Before the child tax credit payments were doubled in 2017, the amount was $1,000 since it was started in the first decade of this century. There was also the per child per year tax exemption of $4,000. It was referred to normally as the Child Deduction. But the beneficiaries were mostly the middle class, and the poor always missed out on such payments as they did not submit income tax returns.
The US has expanded its work-based social safety net significantly in the past twenty years. It has brought in impressive results. In fact, the US is spending more than ever before on low-income families with children.
The Child Tax Credit Out Of Reach For Too Many Families
The Child Tax Credit and the Earned Income Tax Credit have played a vital role in controlling poverty. Both are refundable and paid to wage earners. They have encouraged work and provided increased assistance to low and moderate-income parents who have a steady source of income. These two schemes combined lift more children out of poverty than any other federal program.
But the worst affected are children whose parents do not have a steady income to show and also do not file regular income tax returns. Thus, the poorest among the families have reported worsening conditions due to this highly volatile means of income.
Low wages make it hard for families to afford the basic means for a decent living. These include housing in safe neighborhoods, reliable means of transport, quality child care, nutritious food, and decent educational opportunities.
Families with additional responsibilities like caregiving face high barriers to employment. They include inaccessible educational opportunities and unaffordable childcare. Such barriers constrain both their present and future earnings and make it difficult for them to provide for their families.
While the expanded Child Tax Credit payments have given way to the regular amount of $2,000, some states and local governments are stepping forward to give additional.
Budget Panel Approves Child Tax Credit Expansion In New Jersey
Lawmakers in both the chambers of the budget committee in New Jersey approved the expansion of the state’s Child Tax Credit on Tuesday. This boosted the program further a year after it was enacted.
The bill was passed in votes along party lines and will double the refundable Child Tax Credit to the maximum amount of $1,000. Only children aged five years or below qualify for the credit.
The New Jersey administration achieved huge success with the CTC payments in 2022. State Senator Teresa Ruiz (D-Essex), the prime sponsor of the bill and the majority leader of the chamber, said that they wanted to extend the state Child Tax.
The size of the child tax credit given by New Jersey is linked to the Adjusted Gross Income of the filer. An earning of $30,000 or less would bring in the maximum amount.
Those earning between $60,000 and $80,000 would receive a credit amount of $200. It is the smallest amount afforded under the New Jersey bill. At present, the cold tax credit awarded under New Jersey law is between $100 and $500. The amount is based on the income of the beneficiary. The income limit of the beneficiaries does not change in the new bill.