Stimulus Update: 4 Ways the Child Tax Credit Has Benefited Families in Need
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While the expanded Child Tax Credit has helped millions of low- to moderate-income American families make ends meet over the last few months, it's unclear whether the program will continue past 2021. A proposal to continue the program was included in President Joe Biden's Build Back Better plan, but it appears that the plans for an extension are now on the chopping block.
Lawmakers, who have been battling over ways to slim down the Build Back Better agenda, have now proposed the idea of extending the program for just one more year. While that would be a win for families in need of the extra cash boost, it pales in comparison to the Biden administration's proposal, which would have extended the enhanced credit through 2025 -- giving families in need another five years of bulked up, advanced Child Tax Credit money.
Whether or not any Child Tax Credit expansion will survive the ongoing debates remains to be seen, but what is clear is that the tax credit has given families a vital lifeline in 2021. In fact, the tax credit has had a major impact on households across the country in a myriad of ways -- which is precisely why some Democratic lawmakers want to make it permanent. As we wait for word on what's to come with the Child Tax Credit proposal, here are four ways the tax credit has already proven to be beneficial for families in need.
1. The advance tax credit money reduced financial anxiety significantly after just one check
The first Child Tax Credit was sent to bank accounts and mailboxes in mid-July, and what the data showed was just that one initial payment -- worth a maximum of $250 to $300 per child, dependent upon age -- had a significant impact on those who received it.
A survey from ParentsTogether Action, a national parenting organization, found that about 56% of families who received the first tax credit payment reported that the money helped to reduce their financial anxiety. Per the report, the majority of the money went toward food, utilities, rent, or childcare costs -- all typical household expenditures.
And, what's more is that more than half of those households who were surveyed said the payment was a "huge deal" to their family budget. Another 40% said the cash infusion was "helpful" to their family budget. Combined, about 90% of parents surveyed said that July's payment was helpful or made a "huge difference" to their family's economic security.
2. The Child Tax Credit payments lifted millions of children out of poverty
The money from the advance Child Tax Credit hasn't just helped to lessen the financial anxiety of American households, though. According to a recent study from the Center on Poverty and Social Poverty at Columbia University, the first two checks were responsible for lifting about 3.5 million kids out of poverty.
Per the report, the child poverty rate declined from 11.9% in July 2021 -- which was the month in which the Child Tax Credit was issued -- to 11.5% the following month. Without the tax credit money, the monthly child poverty rate for August 2021 would have been a staggering 16.2%.
The decline in poverty rates after the first Child Tax Credit payment was also significant, according to the Center on Poverty and Social Poverty. Per the report, the first tax credit payment helped to keep about 3 million children from poverty in July. An additional 500,000 children were lifted out of poverty between July and August 2021 thanks to the arrival of the second payment.
And, it is perhaps equally important to point out that if the Child Tax Credit is extended through 2025, it could lower the child poverty rate to 8.4% from 14.2%, according to the report.
3. The Child Tax Credit money has meant millions of households with kids have had enough to eat
The advance payments have also helped to fill bellies across the country. After the July and August payments were issued, the number of households with kids and adults that were reporting a lack of food -- or not having enough to eat -- dropped by about 3.3 million.
According to a recent report, a key reason that these payments helped to reduce hardships like food insecurity is that the American Rescue Plan expanded the Child Tax Credit and made the full amount of the credit available to households with children in the lowest income brackets. Prior to the expansion of the tax credit, about 27 million children lived in homes that received only a partial tax credit -- or no credit at all -- because their household incomes were too low.
The American Rescue Plan also boosted the tax credit from a maximum of $2,000 per child to $3,000 for children ages 6-17, or a maximum of $3,600 for children under 6 years old. This alone helped to provide a sizable income boost to families in significant need of more cash flow -- and made it possible for the lowest-income households to feed their family members.
4. The money has helped parents to continue working
Contrary to popular belief, the extra Child Tax Credit money has not led parents to stop working. In fact, the data shows that there has likely been an opposite effect. According to a recent report released by Humanity Forward, nearly 94% of parents surveyed said they planned to continue working or work even more after receiving their Child Tax Credit money.
Per the report, only 6.4% of survey respondents said they'd use the credit to either work less or change jobs. Of those parents, those with infants or toddlers were nearly twice as likely to be able to work less as a result of the credit, with about 11.2% of parents with infants or toddlers saying that the credit would change their work status.
Most eligible households should have received their October payments by now, which means only November and December's payments remain for 2021. Families should keep an eye on the news to see the latest developments as lawmakers continue to battle it out over legislation that will determine the future of the expanded Child Tax Credit.
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