10 Ways the Biden Child Tax Credit is Helping American Families

10 Ways the Biden Child Tax Credit is Helping American Families

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The Build Back Better Act contains an extension of a huge working families’ tax cut that made an unprecedented investment in America’s parents and children. Originally passed in the American Rescue Plan, President Biden’s expansion of the Child Tax Credit (CTC) increased the value of the credit, sent it to households in monthly installments, and made it fully refundable. The result? More money is reaching more families. While this expansion of the CTC expires this year, the Build Back Better Act would preserve the expanded version for another year. This means even more families will be able to afford basic necessities, grow their savings, and achieve economic stability.

Here are the top 10 facts you need to know about Biden’s CTC and its far-reaching impact:

  1. Getting financial help to those who need it most. According to our analysis, the Build Back Better expansion of the CTC will give the median single mother with two kids, one above age six and one below, an additional $3,800 tax cut. The average married family with the same two kids would get an extra $2,600.1
  2. Driving down food insecurity. Data from the Census Bureau’s Household Pulse Survey shows that CTC payments are playing a big role in reducing household hunger. After just two months of payments, rates of food insecurity fell 36% among Hispanic families and 24% among Black families.2
  3. Boosting GDP. Moody’s Analytics estimated that in the first quarter of 2021, each $1 spent on the expanded CTC would raise the GDP by $1.25.3 The CTC is getting dollars into the hands of working families, and their spending is helping to speed up economic recovery.4
  4. Pulling millions of children out of poverty. The Center on Budget and Policy Priorities found that the American Rescue Plan’s changes to CTC will bring 4.1 million children above the poverty line, reducing the number of children in poverty by more than 40%.5
  5. Injecting money into local economies. According to the Census Bureau, local economies saw $19.3 billion in additional monthly spending as a result of the CTC expansion, providing many communities with a much-needed economic boost.6
  6. Creating jobs and bolstering consumer spending. Researchers at the Niskanen Center predict that over the next 12 months, the CTC will increase consumer spending by $27 billion and create or support 500,000 new median-wage jobs.7
  7. Lifting up rural places. The new CTC is not just helping those in cities and suburbs. Analysis from the Niskanen Center finds it will create over $14 billion in new purchasing power for households in rural regions, roughly doubling its previous value.8
  8. Leaving no family behind. Before the CTC expansion, 27 million children received less than the full credit or no credit at all because their families made too little to qualify. By making the CTC permanently refundable, Build Back Better ensures benefits are reaching families most in need.9
  9. Dramatically reducing poverty rates for children of color. Over the next year, CTC payments are expected to slash poverty rates 45% for Hispanic children, 54% for Black children, and 65% for Native American children.10
  10. Helping families afford child care. Nearly 10% of households used their CTC to pay for child care costs, and that number climbs to 17% for those with at least one child under five. CTC payments are a key part of helping working parents afford child care, especially as costs remain high and quality care harder to access.11

With Congress on the precipice of passing the historic Build Back Better Act, the bill’s extension of the new CTC will mean a massive tax cut for working- and middle-class parents. It will mean significantly fewer children, particularly children of color, living in poverty. And it will lead to critical support for working parents, the creation of more jobs, and an investment in both rural and urban communities. It’s time to pass the Build Back Better Act.

Topics
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Endnotes

  1. Moller, Zach and Sergio Galeano. “What Build Back Better Means for Families in Every State.” Third Way, 1 Dec. 2021, https://www.thirdway.org/report/what-build-back-better-means-for-families-in-every-state. Accessed 6 Dec. 2021.

  2. “New Census Data Shows Child Tax Credit is Key to Reducing Poverty for Families of Color.” Press Release, Economic Security Project, 25 Aug. 2021, https://www.economicsecurityproject.org/wp-content/uploads/2021/08/New-Census-Data-Shows-Child-Tax-Credit-is-Key-to-Reducing-Poverty-for-Families-of-Color.pdf. Accessed 6 Dec. 2021.

  3. Zandi, Mark and Bernard Yaros Jr. “The Biden Fiscal Rescue Package: Light on the Horizon.” Moody’s Analytics, 15 Jan. 2021. https://www.moodysanalytics.com/-/media/article/2021/economic-assessment-of-bIden-fiscal-rescue-package.pdf?ftag=MSF0951a18. Accessed 6 Dec. 2021.

  4. Hendricks, Galen and Lorena Roque. “An Expanded Child Tax Credit Would Lift Millions of Children Out of Poverty.” Center for American Progress, 23 Feb. 2021, https://www.americanprogress.org/issues/economy/reports/2021/02/23/495784/expanded-child-tax-credit-lift-millions-children-poverty/. Accessed 6 Dec. 2021.  

  5. Marr, Chuck et al. “American Rescue Plan Act Includes Critical Expansions of Child Tax Credit and EITC.” Center on Budget and Policy Priorities, 12 Mar. 2021. https://www.cbpp.org/research/federal-tax/american-rescue-plan-act-includes-critical-expansions-of-child-tax-credit-and. Accessed 6 Dec. 2021.

  6. Pathak, Arohi. “Making CTC and EITC Expansions Permanent Would Reduce Poverty and Grow the Economy.” Center for American Progress, 21 Sept. 2021. https://www.americanprogress.org/article/making-ctc-eitc-expansions-permanent-reduce-poverty-grow-economy/. Accessed 6 Dec. 2021.

  7. Hammond, Samuel and Robert Orr. “Measuring the Child Tax Credit’s Economic and Community Impact.” Issue Brief, Niskanen Center, Aug. 2021, https://www.niskanencenter.org/wp-content/uploads/2021/08/Measuring-the-Child-Tax-Credits-Economic-and-Community-Impact.pdf. Accessed 6 Dec. 2021.

  8. Hammond, Samuel and Robert Orr. “Measuring the Child Tax Credit’s Economic and Community Impact.” Issue Brief, Niskanen Center, Aug. 2021, https://www.niskanencenter.org/wp-content/uploads/2021/08/Measuring-the-Child-Tax-Credits-Economic-and-Community-Impact.pdf. Accessed 6 Dec. 2021.

  9. Marr, Chuck et al. “Build Back Better’s Child Tax Credit Changes Would Protect Millions from Poverty – Permanently.” Center on Budget and Policy Priorities, 11 Nov. 2021, https://www.cbpp.org/research/federal-tax/build-back-betters-child-tax-credit-changes-would-protect-millions-from. Accessed 6 Dec. 2021.

  10. Pulliam, Christopher and Richard V. Reeves. “New child tax credit could slash poverty now and boost social mobility later.” Brookings Institution, 11. Mar. 2021, https://www.brookings.edu/blog/up-front/2021/03/11/new-child-tax-credit-could-slash-poverty-now-and-boost-social-mobility-later/. Accessed 6. Dec. 2021.

  11. Perez-Lopez., Daniel J. “Household Pulse Survey Collected Responses Just Before and Just After the Arrival of the First CTC Checks.” United States Census Bureau, 11 Aug. 2021,  https://www.census.gov/library/stories/2021/08/economic-hardship-declined-in-households-with-children-as-child-tax-credit-payments-arrived.html. Accessed 6 Dec. 2021.

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