The Power And Potential Of The Child Tax Credit – National Press Foundation

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Data confirms the Child Tax Credit’s value for boosting children and families out of poverty. Karen Chatfield of the National Center for Children in Poverty explains why.

Program Date: Jan. 23, 2024

When the U.S. House of Representatives passed a bipartisan tax package on Jan. 31 that pairs a temporary expansion of the Child Tax Credit with business tax breaks and credits for low-income housing development, it seemed to confirm the message that Karen Chatfield delivered to NPF Future of the American Child fellows in Charlotte.

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As Director of Family Economic Security for the National Center for Children in Poverty, Chatfield has led extensive research into the CTC’s value for the nation’s low-income and poor families. And she believes the bottom line is clear.

“When families living in states with these generous CTC programs get a lump-sum refund, even if they have no income or very little income, it can be a really important time for them. I saw this in my qualitative work on the SHARP Study, and this contrast could be really promoted with great effect. It will tell so much of the story around the CTC that needs to be told, and how these programs can make such a great difference.”

The SHARP study focused on the American Rescue Plan, which provided $1.9 trillion in aid and economic stimulus in response to the COVID-19 pandemic. The legislation also temporarily increased the Child Tax Credit, which was launched in 1997 as part of the Taxpayer Relief Act. The legislation mandated a $500 per child non-refundable credit intended to give middle- and upper-income families some tax relief.

But post-pandemic, researchers like Chatfield have sought evidence that families battling unemployment, food insecurity, homelessness and health challenges, have found significant benefits from the infusion of cash.

For example, one parent interviewed lost her home during the pandemic after also losing her job. “No matter how hard you work or how much you make, you can never catch up,” she told researchers. “I literally work four jobs to feed my kids. I’m a delivery person, I’m a security guard, I’m a part-time cook, and I’m a schedule coordinator for a moving company, just to be able to manage.”

Another thing researchers noted was the extensive use of food pantries for struggling parents. “It was quite striking. This one mother said, ‘It’s not embarrassing. It’s more embarrassing that they could catch me stealing than to go to a pantry. But if I go to a pantry twice, they don’t give me anything. They tell me no. They tell me you have to wait until it’s your turn again.’ So this mother was really scheduling her weeks between taking care of teens with disabilities and working for cash jobs. She was also just scheduling her weeks so that she could hit different food pantries.”

Regardless of political affiliation or concerns about providing cash payments that might be misused, Chatfield says the CTC allowed many parents to pay for child care so that they could seek or keep employment. But as the Senate prepares to vote on this new extension, Chatfield cautioned that there’s still a long way to go in developing truly effective policies that fuel economic mobility for the most vulnerable Americans.

“Basically, roughly one in three children is again ineligible for the CTC because their families have low or moderate incomes. And predictably, as you know, probably almost certainly, there was a significant increase in child poverty in 2022, going up from 5.2% in late 2021, to 12.4% a year later. This happened in stages. Obviously, families did get that lump-sum payment at tax time. Many of them did, not all of them did, and that was helpful.

Access the full transcript here.

This fellowship is funded by the David and Lucile Packard Foundation, the W.K. Kellogg Foundation and the Heising-Simons Foundation. NPF is solely responsible for programming and content.

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