Nearly 12 million children, including 7.5 million Black and Latino children, are growing up in poverty in the United States – one of the highest poverty rates out of any developed country in the world. And the COVID-19 pandemic threatens to push millions more children into poverty with rates potentially climbing to the highest in 50 years. Impacts on families and children, especially Black and Latino children, are skyrocketing and millions do not know where their next meal will come from. Children are out of school, daycares and childcare settings have shuttered, and programs to help meet children’s basic needs have all but vanished.
Children and families need additional assistance and they need it now. Here’s where the evidence-based and proven anti-poverty Child Tax Credit (CTC) comes in. By expanding and increasing the CTC and creating a new tax credit for young children, Congress can proactively prevent millions of children from sliding into poverty during the pandemic and beyond. We already know that extending the CTC, as outlined in the American Family Act, would lift 4 million children out of poverty, and that’s a step in the right direction.
Here’s why it is urgently needed: While the CTC is one of the most powerful poverty reduction programs we have, it still leaves behind more than 23 million children, including 50 percent of Black and Latino children. That means a program designed to help children shamefully leaves behind those who need help the most. At a time when child poverty is on the rise, our nation must redouble our efforts to reduce child poverty and inequality not just temporarily during this pandemic but in perpetuity.
What’s more, because of the harmful 2017 Tax Cuts and Jobs Act touted as a “win” by President Trump, the poorest children and families are denied from receiving the full benefits of the credit. While the CTC provides a tax credit of up to $2,000 per child, it leaves out millions of low-income and moderate-income children and families because their parents earn too little to qualify. Too many families with young children, families in rural areas, and Black and Latino families are excluded from receiving the full credit. This must be fixed.
As policymakers consider measures to assist families and boost the economy in response to the COVID-19 crisis, Congress has an opportunity to reduce rapidly rising child poverty by expanding one of the most effective programs available to fight poverty and boost family incomes. Any COVID relief package from Congress must include the following changes to the Child Tax Credit, similar to those laid out in the American Family Act, and make them permanent in law:
- Turn the CTC into a child allowance by making the credit fully refundable; eligibility would no longer be tied to earnings so all families with children would qualify;
- Increase the value of the credit up to at least $3,000 for all children with an additional young child tax credit up to $3,600 for children under six;
- Eliminate the refundability cap of $1,400;
- Eliminate the requirement that children have a Social Security Number (SSN) to qualify
- Allow advanced monthly payments for all children and families; and
- Index credit amount to inflation and include a lookback provision during economic downturns.
To learn more about our call for improvements to the CTC during the current crisis and beyond, download our fact sheet here.