Child Tax Credit: 40 racial justice organizations are asking Congress to reinstate the aid

The enhanced Child Tax Credit for 2021 pulled millions of children out of poverty. But when the revamped provisions expired all those gains were lost, and four-decade high inflation is expected to worsen the lot for many more.

A group of over 40 racial justice organizations including the NAACP, the Economic Security Project, the National Urban League, UnidosUS, The Leadership Conference and Community Change Action, implored Congress in a letter to include a reinstatement of the enhanced Child Tax Credit as part of any must-pass legislation. Failure to do so would deny millions of families, including around half of Black and Latino children, access to the vital lifeline.

Enhanced Child Tax Credit improved families’ income security

The Child Tax Credit expansion for 2021 was just one of several tax provisions that were enhanced to help families under the American Rescue Plan. The full amount of the enhanced tax credit were available to individual taxpayers who had incomes below $75,000, double that amount for married couples filing jointly. A majority of households that received the novel advance monthly payments feature of the revamped tax provision, reported less financial anxiety.

The tax provision for families with children is credited with pulling 3.7 million children out of poverty in the second half of 2021, the benefits were especially felt by those in extreme poverty. Since the payments ended in December, all those children have been thrust back into poverty, and the four-decade high inflation is expected to increase their ranks to 4.1 million.

With the changes to the 2021 Child Tax Credit, for the first time, low-income households were able to have access to the tax provision due to the modification that made it fully refundable. That meant that even those who have no “earned” income, those who receive unemployment or Social Security benefits, were eligible to receive the tax credit. Additionally, the beneficiaries were sent monthly installments starting in July on the 2021 Child Tax Credit which was nearly doubled for those with young children. Eligible parents received up to $300 each month per child which helped stabilize swings in income that households can experience.

2021 Child Tax Credit helped households meet basic needs

Democrats tried to pass an extension of the 2021 Child Tax Credit last fall as part of President Biden’s Build Back Better plan which sought to invest in American Families and measures to combat climate change. With only a slim majority in the Senate, Democrats needed all 50 votes they could muster in their caucus to pass the nearly $2 trillion proposal.

However, two of their party members put up resistance to the sweeping spending package. While Senator Kyrsten Sinema was quiet on what was holding up her vote, Senator Joe Manchin publicly took issue with various proposals and the size of the outlay. One in particular, the Child Tax Credit extension, which he told colleague behind closed doors that those who benefited from the advanced payments would spend the money on drugs.

Contrary to the “ugly stereotypes” research has shown that in reality, those who receive the direct cash assistance spend less on temptation goods. Government data on the impact of the Child Tax Credit payments showed that over 90 percent of parents spent their payments on basic needs such as food, utility payments, clothing, or educational costs.

Another qualm that detractors had with the beefed up Child Tax Credit and its monthly installments was that it would deter parents from working. There was no evidence to back up that claim, even the opposite was shown in a study carried out by researchers at the Washington University in St. Louis’ Social Policy Institute (SPI) and Appalachian State University, parents who received payments were employed at higher rates than those that didn’t and some recipients were able to start their own business with the newfound financial security.