Money in the Bank: Child Tax Credit Dollars Head to Parents

President Joe Biden expanded the child tax credit for one year as part of the $1.9 trillion coronavirus relief package that passed in March. On Thursday, dollars started flowing to the pockets of more than 35 million families around the country.

Previously, only people who earned enough money to owe income taxes could qualify for the credit.

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.

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 inequality as only parents who owed the federal government taxes could qualify for its full payment.

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