Several American states are still considering sending out stimulus checks even as the federal government shelves any plan to help Americans to cope with record increases in prices. High inflation rates in 2022 have led to an unprecedented rise in the prices of goods and services across the spectrum.
Inflation affected the prices of everyday goods from groceries to gasoline, and a host of services. But Washington remained tied down in federal politics as the opposition Republicans refused to accede to repeated attempts by Biden and the Democrats to continue giving out stimulus checks through 2022 and 2023.
The Child Tax Credit stimulus check proved to be the last of the stimulus checks sent out by the federal government. The Child Tax Credit stimulus check of 2021 was an enhanced version of the regular CTC stimulus check sent out each year by the federal administration.
But while the regular CTC stimulus checks are limited to $2,000 per year child per year, the expanded version of the payments helped parents receive between $3,000 and $3,600 per child.
The enhanced CTC stimulus check was one of the most effective moves by the federal government. It immensely protected Americans from the economic downturn suffered during the pandemic and after.
How Stimulus Check Helped Avert A Crisis During The Pandemic
The Child Tax Credit stimulus check of 2021 effectively increased the economic security of millions of children. There was a marked decrease in incidents of child poverty and food and housing insecurity. Some reliable estimates suggest that child poverty was reduced by a third as a result of the expansion of the Child Tax Credit.
It was always the plan of President Biden that the Child Tax Credit stimulus check would be expanded for at least three more years and would last through 2025.
Expanding the Child Tax Credit indefinitely would have meaningfully reduced child poverty and enhance the long-term outcome for children across America.
Child Tax Credit Stimulus Checks Have To Evolve To Be Effective
But at the same time, economists and policymakers have raised concerns that such additional inputs would also have negative effects. This includes the chances of reduced labor supply, as they fear that struggling parents would be tempted to spend the additional stimulus amount in ways that will not benefit the children directly. That would defeat the very purpose of the enhanced child tax credit checks.
The need of the moment is to find an enhanced form of CTC payments that would address the concerns of detractors. Policymakers have proposed a novel and efficient CTC mechanism that would help increase the effectiveness of the CTC checks. It would also provide benefits to families in the low-income category.
They have sought other forms of support that include public health insurance at par with private ones, food benefits, and comprehensive childhood education support. Such measures when implemented in tandem with the Child Tax Credit stimulus checks would lead to a marked improvement in immediate childhood outcomes and also the outcome for their parents.
Enhanced CTC Stimulus Check
The enhancement in 2021 for the CTC stimulus checks provided income assistance to families with children. With the assistance to families with children expanded up to $3,600 from $2,000, it brought immense changes to millions of households across America.
In addition, the check was fully refundable. This meant that even families who had very low or no earnings and consequently no income tax liabilities were also eligible for the full credit amount. This was the first in the history of the Child Tax Credit stimulus check.
This full refundability gave full credit to around two million children up to the age of seventeen. They would otherwise have been ineligible for the check under the previous rules on the basis of zero or low parental earnings.
America’s experiment with the expanded version of the CTC check in 2021 laid open the promises, and possibilities of the CTC stimulus checks. But it also exposed the political pitfalls of expanding income assistance to low and moderate-income families if they were delivered in the form of tax credits.
The expansion of the CTC stimulus check in that year increased the economic security of households with children. Estimates indicate that the decrease in food insecurity and child poverty fell drastically by as much as a third as a result of the enhancement of the CTC payments.
The Enormous Cost Of The CTC Stimulus Check Had Even Some Democrats Backtracking
Though undoubtedly effective both in the long and short run, the CTC stimulus check proved to be an enormous burden on the exchequer. The Joint Committee on Taxation estimated that the one-year expansion alone cost an extra $109.5 billion to the federal government. And there was the extant cost of the existing committee as revealed by the Joint Committee on Taxation, 2021. While there have been multiple calls to build on its success and make the policy experiment permanent, the failure of Congress to expand the 2021 expansions of CTC stimulus checks makes it clear that doing so in the future will require policy compromise and also political will.
The State Stimulus Check Balanced The Absence Of Federal Stimulus Checks To A Certain Extent
The present years have mostly been about the continuation of 2022 state checks. Very few fresh payments were announced by the states that sent out stimulus checks to residents. This helped assuage the effect of inflation among low and moderate-income families.
While the federal government provided effective economic backup during the pandemic and immediately afterward, it is the state government that has been active and effective during the inflation months in 2022.
But there are still fresh checks going out to residents in 2023. Idaho is one of the states that is sending out checks to residents, which is 12% of the tax liability before credits, other taxes, and payments of rebates for the first year with a minimum of $75.
The math works out to be a nice check for Idaho residents. Rebate payments will be sent out through 2023 and will be linked t when residents filed their 2022 income tax returns this year.