For the first time in six months, families are forgoing a monthly child tax credit installment on Friday — a program that was meant to be part of President Joe Biden’s legacy, but instead came across as a point of departure. shed light on who is worthy of government support.
Retired Andy Roberts, of St. Albans, West Virginia, relied on the checks to help raise his two young grandchildren, whom he and his wife adopted because the birth parents are recovering from a substance addiction.
The Roberts are now at $550 a month. The money helped pay for Girl Scouts, ballet and acting classes, and children’s shoes, which Roberts says are more expensive than adult shoes. The tax credit, he said, was a “godsend.”
“It will force you to tighten your belt, if you have anything to tighten,” Roberts said of the loss of payments.
The monthly tax credits were part of Biden’s $1.9 trillion coronavirus relief package – and the president had proposed extending them for another full year as part of a separate measure focused on economic and social programs.
But Democratic Sen. Joe Manchin, of Roberts’ home state of West Virginia, opposed extending the credit, fearing the money would discourage people from working and any additional federal spending is fueling inflation which has already reached almost 40- year highs.
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According to IRS data, 305,000 West Virginia children benefited from the expanded credit last month.
Manchin’s opposition in the equally divided Senate derailed Biden’s social spending package and caused expanded tax credits that rolled out in the middle of each month to expire in January. This reduces family incomes just when people are grappling with higher prices.
However, families only received half of their 2021 credit on a monthly basis and the other half will be received once they file their taxes in the coming months. The amount of the credit will be reduced in 2022, with full payments only going to families who have earned enough income to owe taxes, a policy choice that will limit benefits for poorer households. And the credits for 2022 won’t come until people file their taxes early the following year.
West Virginia families interviewed by The Associated Press pointed to rising grocery and gas bills and said they will have to make do with less of a financial cushion than a few months ago.
“You’re going to have to learn to adapt,” said Roberts, who worked as a car dealership for five decades. “You never really dreamed that everything would blow up all of a sudden. It’s $7-8 a pound.
By the Biden administration’s calculations, the expanded child tax credit and its monthly payments were a political success that brought in $93 billion over six months. More than 36 million families received the payments in December. Payments were $300 per month for each child 5 and under and $250 per month for children ages 6 to 17.
The Treasury Department declined to answer questions about the expiration of the expanded child tax credit, which has become a politically sensitive issue under Biden’s stalled nearly $2 trillion economic package. in the Senate.
Manchin backed some form of work requirement for people receiving the payment, fearing the automatic government aid could push people out of their jobs. Yet his main objection, in a written statement last month, skirted that issue as he voiced concerns about inflation and a one-year extension obscuring the true costs of a tax credit that could become permanent.
“My fellow Democrats in Washington are committed to radically reshaping our society in a way that makes our country even more vulnerable to the threats we face,” Manchin said. He added that he was worried about inflation and the size of the national debt.
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The Census Bureau surveyed recipients’ spending habits in September and October. Almost a third used the credit to pay for school expenses, while about 25% of families with young children spent it on child care. About 40% of recipients said they relied primarily on the cash to pay off their debts.
There are distinct benefits in terms of improved outcomes for poor children, whose families previously could not access the full tax credit because their incomes were too low. An analysis by the Urban Institute estimated that extending credit as developed by the Biden administration would reduce child poverty by 40%.
The tax credits did not cause an immediate exodus of the labor force, as some legislators had feared. The Bureau of Labor Statistics reported that the percentage of people with jobs fell from 58% the month before monthly payments began to 59.5% last month. This same trend occurred in West Virginia, where the employment-to-population ratio reached the pre-pandemic level of 52.9%.
There is academic debate over whether credit could suppress long-term employment, with most studies suggesting that the impact would be statistically negligible.
Academics studying the tax credit are torn about how a permanent program would affect the economy and the well-being of children.
Katherine Michelmore, an associate professor of public policy at the University of Michigan, and two other researchers estimated that about 350,000 parents would leave the workforce, a figure that isn’t that big in an economy of around 150 million. jobs.
Michelmore said the long-term effects of a permanent tax credit would have a positive impact on the economy, as children who grow up in higher-income families “tend to do better in school, they are more likely to graduate from high school. It may take 50 years, but there will be more savings in the future.”
One of the key questions for policy makers is whether bureaucracies or parents are better off spending money on children. Manchin proposed a 10-year funded version of Biden’s economic proposal that would remove the focus on child tax credits and instead fund programs such as universal pre-kindergarten, to avoid sending money. money directly to families.
“It’s a moral question whether you trust families to make their own decisions,” Michelmore said.
Hairstylist Chelsea Woody is a single mom from Charleston, West Virginia who works six days a week to make ends meet. The extended child tax credit payments had helped pay for her son’s daycare, while allowing her to splurge on clothes for him.
“It really helps a lot. It’s an extra cushion, instead of worrying about how I’m going to pay a bill or if something happens,” Woody said as he loaded groceries into his car. “It’s useful for a lot of people. It helps working families because we are struggling the most. I am rarely home with my child because I work all the time.
Hussein reported from Washington and Boak from Baltimore.
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