Money in the bank: Child tax credit dollars head to parents

The result is that most families will now qualify for monthly payments of as much as $300 per child beginning Thursday.

Posted: Jul 15, 2021 7:09 AM

WASHINGTON (AP) — The child tax credit had always been an empty gesture to millions of parents like Tamika Daniel.

That changes Thursday when the first payment of $1,000 hits Daniel’s bank account — and dollars start flowing to the pockets of more than 35 million families around the country. Daniel, a 35-year-old mother of four, didn’t even know the tax credit existed until President Joe Biden expanded it for one year as part of the $1.9 trillion coronavirus relief package that passed in March.

Previously, only people who earned enough money to owe income taxes could qualify for the credit. Daniel went nearly a decade without a job because her oldest son is autistic and needed her. So she got by on Social Security payments. And she had to live at Fairfield Courts, a public housing project that dead-ends at Interstate 64 as the highway cuts through the Virginia capital of Richmond.

But the extra $1,000 a month for the next year could be a life-changer for Daniel, who now works as a community organizer for a Richmond nonprofit. It will help provide a security deposit on a new apartment.

“It’s actually coming right on time,” she said. “We have a lot going on. This definitely helps to take a load off.”

Biden has held out the new monthly payments, which will average $423 per family, as the key to halving child poverty rates. But he is also setting up a broader philosophical battle about the role of government and the responsibilities of parents.

Democrats see this as a landmark program along the same lines as Social Security, saying it will lead to better outcomes in adulthood that will help economic growth. But many Republicans warn that the payments will discourage parents from working and ultimately feed into long-term poverty.

Some 15 million households will now receive the full credit. The monthly payments amount to $300 for each child who is 5 and younger and $250 for those between 5 and 17. The payments are set to lapse after a year, but Biden is pushing to extend them through at least 2025.

The president ultimately would like to make the payments permanent — and that makes this first round of payments a test as to whether the government can improve the lives of families.

Biden will deliver a speech Thursday at the White House to mark the first day of payments, inviting beneficiaries to join him as he seeks to raise awareness of the payments and push for their continuation.

"The president felt it was important to elevate this issue, to make sure people understand this is a benefit that will help them as we still work to recover from the pandemic and the economic downturn," White House press secretary Jen Psaki said Wednesday.

Florida Republican Sen. Marco Rubio, who successfully championed increasing the credit in 2017, said that the Democrats’ plans will turn the benefits into an “anti-work welfare check” because almost every family can now qualify for the payment regardless of whether the parents have a job.

“Not only does Biden’s plan abandon incentives for marriage and requirements for work, but it will also destroy the child-support enforcement system as we know it by sending cash payments to single parents without ensuring child-support orders are established,” Rubio said in a statement Wednesday.

An administration official disputed those claims. Treasury Department estimates indicate that 97% of recipients of the tax credit have wages or self-employment income, while the other 3% are grandparents or have health issues. The official, who requested anonymity to discuss internal analyses, noted that the credit starts to phase out at $150,000 for joint filers, so there is no disincentive for the poor to work because a job would just give them more income.

Colorado Democratic Sen. Michael Bennet said the problem is one of inequality. He said that economic growth has benefited the top 10% of earners in recent decades, while families are struggling with the rising costs of housing, child care and health care. He said his voters back in Colorado are concerned that their children will be poorer than previous generations and that requires the expansion of the child tax credit.

“It’s the most progressive change to America’s tax code ever,” Bennet told reporters.

Parenthood is an expensive undertaking. The Agriculture Department estimated in 2017, the last year it published such a report, that a typical family spends $233,610 to raise a child from birth to the age of 17. But wealthier children get far more invested in their education and upbringing, while poorer children face a constant disadvantage. Families in the top third of incomes spend about $10,000 more annually per child than families in the lower third.

The child tax credit was created in 1997 to be a source of relief, yet it also became a driver of economic and racial inequality as only parents who owed the federal government taxes could qualify for its full payment. Academic research in 2020 found that about three-quarters of white and Asian children were eligible for the full credit, but only about half of Black and Hispanic children qualified.

In the census tract where Daniel lives in Richmond, the median household income is $14,725 —almost five times lower than the national median. Three out of every 4 children live in poverty. For a typical parent with two children in that part of Richmond, the expanded tax credit would raise income by almost 41%.

The tax credit is as much about keeping people in the middle class as it is about lifting up the poor.

Katie Stelka of Brookfield, Wisconsin, was laid off from her job as a beauty and haircare products buyer for the Kohl’s department store chain in September as the pandemic tightened its grip on the country. She and her sons, 3-year-old Oliver and 7-year-old Robert, were left to depend on her husband’s income as a consultant for retirement services. The family was already struggling to pay for her husband’s kidney transplant five years earlier and his ongoing therapies before she was laid off, she said.

With no job prospects, Stelka re-enrolled in college to study social work in February. Last month she landed a new job as an assistant executive director for the nonprofit International Association for Orthodontics. Now she needs day care again. That amounts to $1,000 a week for both kids.

All the tax credit money will go to cover that, said Stelka, 37.

“Every little bit is going to help right now," she said. "I’m paying for school out-of-pocket. I’m paying for the boys’ stuff. The cost of food and everything else has gone up. We’re just really thankful. The tide feels like it’s turning.”

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 755401

Reported Deaths: 8531
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Hennepin1513291905
Ramsey62614972
Dakota56158520
Anoka53010513
Washington33145327
Stearns27922252
St. Louis23178352
Scott21316159
Wright20879170
Olmsted17821118
Sherburne15232111
Carver1336954
Clay1006598
Rice9855131
Blue Earth949559
Crow Wing9254105
Kandiyohi819195
Chisago816662
Otter Tail7807104
Benton7363108
Beltrami633276
Mower631740
Douglas616189
Goodhue603683
Winona603653
Itasca596978
McLeod580868
Steele572425
Isanti558172
Morrison541565
Becker518762
Polk502577
Freeborn480842
Nobles477052
Lyon444456
Carlton438666
Nicollet423051
Pine419930
Cass413142
Mille Lacs403565
Brown398846
Todd389336
Le Sueur378331
Meeker350452
Waseca322629
Martin316534
Wabasha28495
Hubbard283644
Dodge26819
Roseau258924
Fillmore236312
Redwood234143
Wadena230229
Houston229017
Renville224249
Faribault214630
Pennington213227
Sibley204512
Cottonwood193027
Kanabec187130
Chippewa185839
Aitkin178442
Watonwan168711
Pope15328
Rock153219
Yellow Medicine151120
Jackson144114
Koochiching137219
Clearwater133318
Swift132619
Pipestone131627
Marshall131419
Murray131310
Stevens122311
Lake106221
Wilkin100214
Lac qui Parle95024
Mahnomen86312
Norman8459
Big Stone7874
Grant7669
Lincoln7525
Kittson59522
Red Lake5769
Unassigned528124
Traverse5005
Lake of the Woods4524
Cook2420

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 467281

Reported Deaths: 6685
CountyCasesDeaths
Polk73698716
Linn28680379
Scott24441271
Black Hawk20130355
Woodbury18854242
Johnson17800100
Dubuque15577228
Pottawattamie14073197
Dallas13894107
Story1275148
Warren763496
Webster6876111
Cerro Gordo6816107
Clinton6814100
Des Moines657893
Marshall635484
Muscatine6294113
Wapello5807136
Jasper571478
Lee560787
Sioux560276
Marion499791
Buena Vista489745
Plymouth459187
Henry378647
Jones365160
Washington362255
Bremer353867
Benton352056
Boone344837
Carroll341753
Crawford337345
Mahaska313656
Dickinson297651
Clay274631
Buchanan274239
Jackson270445
Kossuth269373
Hardin266448
Tama261476
Fayette253848
Delaware253444
Cedar246326
Page244827
Wright240945
Winneshiek230837
Hamilton228553
Floyd216744
Harrison215277
Madison214325
Clayton210058
Poweshiek206840
Iowa204229
Butler203237
Jefferson197340
Mills197227
Allamakee192952
Cherokee191943
Lyon190641
Cass190557
Winnebago185432
Hancock184739
Calhoun184115
Appanoose175950
Shelby174239
Louisa169651
Grundy167937
Emmet163842
Franklin163328
Humboldt161826
Mitchell161843
Union159437
Chickasaw156418
Sac156323
Guthrie154034
Palo Alto140831
Clarke140028
Montgomery138941
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Monroe131534
Howard125422
Ida116641
Davis113825
Greene113712
Lucas112224
Pocahontas109323
Monona107436
Worth10678
Adair103634
Osceola91117
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Van Buren82721
Decatur81212
Taylor78612
Wayne72024
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Adams4984
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