The expanded credit, which lasts through December, is benefitting an estimated 90% of Wisconsin children.
Neil Stanley recently got some good news: His job at the Chippewa Valley Regional Airport will expand from part- to full-time beginning next month.
Neil and his wife, Breana, looked forward to having more money in their pockets, but his extended hours raised a question many parents face when they take on more work—who would look after their two children, daughter Lennon, 4, and son Abram, 3?
Because of the scarcity and high cost of quality child care, which the pandemic exacerbated, families have had to make some tough decisions. Due to lower pay or gender roles, the result has been more mothers leaving the workplace.
Fortunately for the Stanleys, who live in Eau Claire, and millions of families across the country, they recently started receiving an extra $600 each month thanks to the expanded federal child tax credit approved by Congress earlier this year as part of the American Rescue Plan.
Most families with children across the US began receiving child tax credit payments in July under the expansion, which converted the credit into a monthly payment rather than an end-of-year tax credit and increased the credit from $2,000 to $3,600 annually (or $300 per month) for each child under 6 and from $2,000 to $3,000 yearly (or $250 per month) for kids age 6-17. Families have now received two checks under the expansion.
When the Stanleys initially heard about it, they’d planned to use that money to pay off debt and build up their savings. Now they’ve found a more immediate use for it: childcare costs.
“For us, that money is really going to help a lot,” Breana Stanley said, noting the childcare bill for Abram will total $194 weekly. Lennon will turn 5 next month and will attend 4-year-old kindergarten classes this school year.
In Wisconsin, an estimated 1.2 million children, or 90% of those in the state, will be impacted by the tax credit, with 45,000 being lifted out of poverty, according to the Center for Budget and Policy Priorities. Nationally, the tax credit is projected to help about 4.1 million children out of poverty, and it will positively impact tens of millions more.
On July 15, the IRS stated that 39 million families received their first monthly payments for a total of $15 billion, but the rollout has been a mixed bag, largely dependent upon income levels and immigration status.
Tim Smeeding, an expert on poverty and income equality with UW-Madison’s La Follette School of Public Affairs, said that for middle- and working-class families—families that, for the most part, have filed their taxes and claimed their children as dependents—he would give the IRS an A.
“Those people are getting the benefit and that’s helping them,” Smeeding said. “It’s helping them do things for their kids that they couldn’t do before: after school care, extracurricular activities that cost money, little bit better clothes to go to school, better lunch, school bags, all sorts of things that parents want to do for the kids.”
However, less conventional families—often those with the greatest need for the program—are still awaiting payments. Households headed by grandparents, which are growing in number due to the opioid crisis, addiction, incarceration, and illness, may not file income taxes or may not claim their grandchildren as dependents. Those households are also particularly vulnerable; 19% of grandfamilies live in poverty.
Parents with mixed immigration statuses were left out or even denied the tax credit in the initial rollout. The Washington Post reported last month that a glitch with the IRS’s system denied families with mixed immigration status their child tax credit.
Jessie Alarcon, a US citizen and Madison resident, told the Post her family was flagged because her husband, a Mexican-born legal permanent resident, has an Individual Taxpayer Identification Number, which is issued to non-citizens who do not have a Social Security number.
Yet poverty researchers say the program, when it works as intended, is playing a large part in improving the financial wellbeing of low-income families.
On Friday, Smeeding participated in a web conference on tax policy for low-income Americans, where researchers pointed to research that found that after the earned income tax credit (EITC) was introduced, low-income families’ financial situation improved. Many of those researchers, looking at how the CTC is already improving the wellbeing of families with children, support extending it, predicting it would provide long-term financial benefits similar to the EITC.
Child tax credits payments are scheduled to end Dec. 31. Many congressional Democrats are seeking to extend them beyond this year, with some calling for making them permanent. President Joe Biden has called for extending the payments through 2025.
Republicans in Congress have balked at the extension, with some saying it is too expensive to continue beyond the end of this year. No Republicans voted in favor of the American Rescue Plan, which included the temporary child tax credit extension.
Smeeding said now that middle class and working class families have received these payments and have seen first-hand what they have done for their families, it’s going to be much harder politically not to extend them.
“Kids in [lawmakers’] districts are starting to get help from the government that’s highly visible and it’s there every month,” Smeeding said. “They’re going to say, ‘Hey, don’t take this away from us.’”
Extending child tax credit payments would provide a financial boost to working-class families whose wages often fail to keep pace with rising living expenses, Breana Stanley said.
“If we extended this or made it permanent, it would help me and many other people,” she said. “Without that, after this money ends, I will basically be working just to pay for child care.”
In the first two months of the program, the US Census Bureau has reported, based on the Household Pulse survey, a nationwide 24% drop in food insecurity.
Smeeding said once the issues with the CTC rollout are resolved and those families receive the payments they are owed, experts will be able to better assess the full impact of the tax credits and other benefits programs have had on families. But so far, it appears trends are moving in the right direction and, with a SNAP benefit increase scheduled for October, Smeeding said “we should be seeing more of the same.”
UpNorthNews reporter Julian Emerson contributed to this story.