The ongoing and uneven economic impact of the coronavirus pandemic has motivated policy makers to look at ways to support economic security for American families and address child poverty.
This briefing will provide background on child poverty in the U.S. and summarize recent proposals to address economic security and child poverty from the House Ways and Means Committee and Senator Mitt Romney (R-UT), and summarize other relevant legislation, including:
This briefing includes:
Because of the ongoing economic impacts of the coronavirus pandemic, policy makers across the political spectrum are concerned about the ability of families to work and earn a living wage. Layoffs, reduced hours, and difficulty handling the new responsibilities in the pandemic have battered families across the U.S., particularly low-wage and minority workers. Concerns about the ongoing crisis of child poverty in the U.S. and the potential exacerbating impact of the coronavirus pandemic have motivated policymakers to propose policies to address child poverty and economic security.
As part of President Joe Biden’s American Rescue Plan, Biden called on Congress to expand and reform the Child Tax Credit. A similar proposal has been incorporated into the budget reconciliation legislative recommendations that the House Ways and Means Committee recently approved.
However, it was Senator Mitt Romney’s (R-UT) proposal to create a monthly direct payment to parents that caused the biggest splash. In response, Senators Rubio (R-FL) and Lee (R-UT) issued a statement supporting expansion of the Child Tax Credit in-line with the Democratic proposals, but opposing the Romney plan as “welfare.”
For more background information, check out these links:
In spite of the advanced U.S. economy, the U.S. suffers from a serious child poverty problem. Seventeen and under is the poorest age group in the U.S. Nearly 11 million children live in poverty in the U.S. The situation is worst for children of color: 18% of black children and 22% of Hispanic children live in poverty, compared to 8% for non-hispanic white children.
Scientific studies have identified serious and lasting repercussions for children who grow up in poverty. According to the Children’s Defense Fund, poor children are more likely to:
Have poor academic achievement.
Drop out of high school and later become unemployed.
Experience economic hardship.
Be involved in the criminal justice system.
Remain poor at age 30.
For more information on child poverty, check out these links:
House Ways and Means Reconciliation Recommendations
On February 10th, the House Ways and Means Committee approved budget reconciliation legislative recommendations on a party line vote. Included in Subtitle G is an expansion and reform of the Child Tax Credit (CTC). Currently, the Child Tax Credit enables eligible families to reduce their federal income tax liability by $2,000 per child.
The House Ways and Means reconciliation legislative recommendations reform the CTC by:
Making the CTC fully refundable for 2021.
Increasing the amount to $3,000 per child ($3,600 for a child under age 6).
Increasing the age of qualifying children by one year for 2021 to allow 17-year-olds to qualify.
Directing the Secretary of the Treasury to issue advance payments of the Child Tax Credit, based on 2019 or 2020 tax return information.
Making the payments into monthly payments (or the frequency the Director of Treasury determines is feasible) starting July 1, 2021. The monthly payments are designed to amount to half of the Child Tax Credit the taxpayer is entitled to for 2021; the remaining half to be claimed on the 2021 tax return.
Ways and Means Documents:
Romney “Framework”: The Family Security Act
On February 4th, Senator Mitt Romney (R-UT) outlined a policy framework intended to “provide greater financial security for American families by streamlining existing family policies to create one universal Child benefit.” Dubbed the Family Security Act, his policy proposal would provide a monthly cash benefit to families for each child: $350 per month for young children, and $250 per month for each school-aged child.
The details of the proposal have been provided in a one pager summarizing the policy, but have not yet been introduced as legislative language. According to Senator Romney’s one pager, the framework is designed around three key policies, creation of the monthly benefit, reforming the Earned Income Tax Credit (EITC), and making the benefit deficit neutral by eliminating or reforming a number of policies.
Monthly Child Benefit
Parents are eligible to receive the benefit four months prior to the child’s due date.
The maximum monthly payment per family is $1,250.
The program would be administered through the Social Security Administration and available to children with a SSN.
The annual child benefit would be reduced by $50 for every $1,000 above the current Child Tax Credit income phaseout thresholds. These are currently $200,000 for single-filers and $400,000 for joint filers.
Simplifies the EITC by creating a larger family benefit that doesn’t change based on the number of dependents.
Slows benefit cliffs in order to address potential marriage penalties and address potential disincentives to work.
S.690 - American Family Act
According to Senator Bennet (D-CO), the American Family Act would overhaul the existing Child Tax Credit by:
Creating a new expanded credit for children under 6 called the Young Child Tax Credit (YCTC) which provides $300 per month ($3,600 per year) for children under 6 years of age.
Increasing the maximum Child Tax Credit for children under 17 to $250 per month ($3,000 per year) for children 6 to 17.
Makes both the YCTC and CTC fully refundable, meaning that all low-income families would receive the full credit for each child.
Index the credits for Inflation.
Set up advance payments on a monthly basis.
U.S. Representatives Rosa DeLauro (D-CO) and Suzan DelBene (D-WA) introduced H.R.1560, a companion bill of the same name in the House of Representatives.