Why some advocates say the Ukraine war makes a monthly child tax credit crucial
With inflation and rising gas prices from sanctions, low-income families are struggling even harder than before, says Humanity Forward
Most Americans support sanctions designed to pressure Russia into stopping its attack on Ukraine — even when they lead to higher gas prices.
But not everyone’s equally able to bear the added cost. That’s why some who advocate for the poor want Congress to resume monthly payments of the federal child tax credit, which qualified families received from July to December 2021 to ease the financial pain of the COVID-19 pandemic.
During that time, roughly 3.7 million, or 30%, of American children were lifted out of poverty, according to Columbia University. Since the payments stopped, a similar number of kids have plunged right back into poverty.
“Lower-income families with young children are facing increasing financial pressures due to higher energy prices and rising inflation. At the same time, they have lost their monthly child allowance available through the American Rescue Plan Act,” said Cynthia Osborne, professor of early childhood education and policy and executive director of the Prenatal-to-3 Policy Impact Center at Vanderbilt University.
Resecuring monthly payments of the child tax credit is the highest priority for Humanity Forward, based in Washington, D.C., according to its spokesman, Greg Nasif.
Besides lifting children out of poverty, he said, “monthly is how families budget. It just isn’t going to help anyone, no matter what size the credit is, if they’re not getting it until next year. How’s that going to help with inflation today?”
Expanded help in COVID-19
Change is nothing new for the child tax credit, which has been altered and expanded under both Republican and Democratic majorities over two decades, Humanity Forwardsays.
Before the pandemic, the child tax credit was $2,000 per child under 17 in income-eligible families. It wasn’t refundable, though, which means families had to earn a certain amount to be able to claim it.
As part of the American Rescue Plan, Congress boosted the child tax credit from $2,000 to $3,000 for children ages 6-17 and to $3,600 for those under 6. Half of the money could be collected at tax time, as usual, while the other half was paid in monthly chunks sent directly to families.
The credit was also temporarily made fully refundable, which meant that even families that earn too little to have to pay taxes could claim the credit. Nearly all children in the U.S. were eligible for the credit.
When the Biden administration analyzed the American Rescue Plan’s expanded child tax credit state by state, it noted, for example, that an estimated 423,000 Utahfamilies – including their 851,000 kids, benefited from the credit. In West Virginia, 196,000 families, including 324,000 children, benefited. Overall, the White House reported, close to 40 million families and roughly 65 million children received the tax benefit — including some 3.5 million children in New York and 7.5 million kids in California.
But when Jan. 1 of this year rolled around, the expanded amounts, the monthly payments and the refundability all stopped.
Manchin’s not budging
The proposed — but stalled — Build Back Better Act includes an extension of the expanded version of the child tax credit, including the monthly payments, for another year. But Democrats are struggling to gain the support of their senators. (All 50 Democratic votes are needed to move the child tax credit forward through the reconciliation process.)
Democrat Sen. Joe Manchin, D-W.Va., has been outspoken in his criticism of the measure since it doesn’t have a work requirement. He’s argued that the “bill’s $1.7 trillion price tag (is) too much to stomach when U.S. inflation has hit a 40-year-high,” The Guardian reported. Another recent report from HuffPost said Manchin has privately told colleagues that parents would spend child tax credit money on drugs.
The Census Bureau said its surveys show parents spent the extra money on child care, food, rent and utilities.
Nasif said Humanity Forward still hopes the credit, paid monthly, can be restarted through the reconciliation process. But they’re not counting on it. The group is talking up its importance to members of both political parties — including by pointing out that the credit has broad bipartisan appeal with the public.
They’re also supporting efforts by states to create their own child tax credits. “We haven’t really taken an active advocacy role in that, but we are applauding the states that are going it alone on that,” said Nasif.
The National Conference of State Legislatures says seven states have a state-level child tax credit. Of those, California, Colorado, Maryland and New York have made the credit refundable so they can be claimed by even the lowest-income families. How they’re structured, eligibility requirements and what they give families in each state varies a lot, but each state-level child tax credit is designed to provide some financial support to families in need.
“Similar to the federal child tax credit, state child tax credits are a strategy for improving family economic stability and often have bipartisan support. The COVID-19 pandemic created or compounded economic burdens for many families, and recent legislative trends suggest states are increasingly considering child tax credits,” the conference report said.
It noted that since 2019, nine states — Connecticut, Hawaii, Illinois, Iowa, Kansas, Michigan, Missouri, Oregon and West Virginia — have introduced legislation to create state-level child tax credits. Meanwhile, California and New York are considering expanding their versions, the report added.
What families need
Millions of families were already in crisis before COVID-19 added job, child care and school disruptions to their lives. Now inflation and the war in Ukraine are both adding financial pressures.
Rising prices mean money doesn’t stretch as far as it did; they’re even eating away gains from higher wages some families gained in a tight labor market, said Sarah Halpern-Meekin, an associate professor at the University of Wisconsin-Madison and co-author of “It’s Not Like I’m Poor: How Working Families Make Ends Meet in a Post-Welfare World.”
Now, during tax season, families can file tax returns to receive the half of the 2021 expanded child tax credit they didn’t get monthly, she said. “This lump sum may help families to manage the rising costs and loss of the monthly CTC they are now experiencing. However, this is temporary. Families will likely have spent much of this money down by the summer.”
Still, financial pressures are not new to the pandemic or this inflationary moment for many of the families, Halpern-Meekin said.
She believes continuing the expanded child tax credit should not hinge on inflation or current events. Families would face challenges if a credit “disappears or reappears depending on gas prices and inflation rates,” she said. Rather, they need to know the amount and timing of income so they can budget their spending.
“It has been hard for many families to stretch their budgets to cover all their kids’ needs for a long time, and those longer-term issues should continue to be a primary consideration in these policy debates,” said Halpern-Meekin.
Osborne hopes community groups will encourage families to file their tax returns even if it’s not required because they don’t earn enough. Most of those will be eligible to claim the still-unpaid share of the child tax credit, as well as other credits that target low-income families with children.
She noted families can file up to three years’ worth of returns, so if a family did not file last year or the year before, they might get a substantial sum. “Unfortunately, hundreds of thousands of eligible families do not file their tax returns because they don’t owe any taxes, and aren’t aware of these benefits,” Osborne said.
Nasif said it’s unlikely the 2021 expanded version of the child tax credit will be revived in its entirety. Compromise will be needed. But he emphasizes strong arguments for pairing that measure with the sanctions on Russia and to counter the surge in inflation in order to help struggling families.
“Russia’s unprovoked assault on its democratic neighbor — that’s going to send prices even higher. So we’ve been calling on Congress to renew the 2021 version of the credit to help families get through this,” said Nasif.
As people consider the Russian onslaught, “I think it’s easy for you and me to focus a lot on it and care, and to well wish and to maybe even donate or to write to our members of Congress to contribute to the Ukrainian defense of democracy,” Nasif said. “I think there’s a lot of people across the country who don’t have the luxury of investing their heart in a struggle for democracy abroad. And I think Americans in their hearts do love and want to support democracy, but it’s very hard when they’re still struggling to feed their kids or keep kids in their home.”
He believes paying a portion of the tax credit monthly would help as sanctions hit pocketbooks at home. “What I really want to tell Congress is to help all Americans care about this and stand with Ukraine,” said Nasif.