3.7 million kids may fall into poverty in January without child tax credit, study says
The end of the monthly child tax credit payments could push millions of children into poverty, a new study found.
The temporarily enhanced child tax credit was included in the $1.9 trillion American Rescue Plan signed into law by President Joe Biden in March. It provided eligible families with up to $3,600 per child over the course of a year — a boost from the previous $2,000 child tax credit.
It also marked the first time that eligible families received part of the credit as a direct payment. The first half of the credit was sent as monthly payments of up to $300 from July through December. The second half can be claimed when parents file their 2021 federal income taxes.
January is the first time in months that families won’t receive a direct payment, as the boosted credits came to their planned end, and it could translate to a jump in the country’s child poverty rate compared with the end of last year, according to a study published Tuesday, Jan. 18, by the Center on Poverty and Social Policy at Columbia University.
Researchers wrote they “established a novel method of forecasting poverty” in 2020 to estimate poverty rates each month. That “framework estimates monthly child poverty rates” based on a family’s income in a given month. The monthly analysis does not “assume perfect coverage” for the child tax credit, unlike in some annual frameworks.
“Our focus on monthly poverty may, in most months, understate the poverty reduction effect of the CTC compared to its effect on annual poverty,” the study notes.
Keeping children out of poverty
The study estimates that with the first direct payment in July, which reached 59.3 million children, the enhanced child tax credit kept 3 million children out of poverty. But as payments continued, they reached more children — up to 61.2 million in December, which kept an estimated 3.7 million children out of poverty.
Researches said the “increasing coverage” meant more Black and Latino children, who were previously left out of the child tax credit at disproportionate rates, saw “important anti-poverty gains over time.”
“The first payment reduced child poverty among Black children by 21 percent in July, but the sixth payment, on its own, reduced Black child poverty by 25 percent in December,” the study found. “Similarly, the first payment reduced child poverty among Latino children by 25 percent in July, but the sixth payment, on its own, reduced Latino child poverty by 30 percent in December.”
A study published by the Center on Budget and Policy Priorities in March, before the child tax credit enhancements started going out, estimated that the credit would lift 4.1 million children out of poverty.
“A recent roundup of the available research on the implementation and impact of the first six months of the expanded child tax credit reveals that the weight of the evidence is clear: the monthly child tax credit payments have buffered family finances amidst the continuing COVID-19 pandemic, have increased families’ abilities to meet their basic needs, have reduced child poverty and food insufficiency, and have had no (discernible) negative effects on parental employment,” the more recent study said.
The end of the payments and child poverty
The study noted that it will not have a monthly poverty estimate for January until the following month. But it said it can “safely project that the monthly child poverty rate will increase without the child tax credit payment.”
“Our initial projection suggests that the monthly child poverty rate could increase from 12.1 percent in December 2021 to at least 17.1 percent (what the monthly child poverty rate might have been in absence of the Child Tax Credit payment in December 2021),” it said.
That estimate translates to 3.7 million additional children living in poverty, according to the study.
That’s also higher than the child poverty rate of 15.8% in June, before the payments started, the study said. At that time, many families were still benefiting from other forms of COVID-19 relief have since expired.
“A potential monthly child poverty rate of 17.1 percent in January 2022 would be higher than monthly child poverty rates throughout 2021 and would be the highest monthly child poverty rate since December 2020.”
Researchers said their past work has demonstrated that child poverty rates go hand-in-hand with “food insufficiency,” housing and well-being trends.
“If this holds in January 2022, we can expect that, in addition to rising monthly poverty, the absence of the child tax credit payments will lead to rising levels of food hardship and declining well-being more broadly in the months to come,” the study said.
About the child tax credit
The American Rescue Plan only boosted the child tax credit through the end of 2021, and lawmakers have not taken action to extend the payments into 2022.
So, the expansion has expired, meaning monthly payments, which typically went out to eligible families on the 15th of each month, will no longer be distributed.
The Biden administration’s Build Back Better plan includes an extension of the boosted credit. The U.S. House passed the bill in November, but it faces an unlikely passage in the Senate after Sen. Joe Manchin, a Democrat from West Virginia, said he wouldn’t support it.
Families will still need to claim the second half of the credit when they file taxes. Those who received monthly payments need to compare the amount they received with the amount “they can properly claim on their 2021 tax return,” the IRS said in December.
“In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021,” the IRS said. “People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.”
This story was originally published January 19, 2022 at 3:09 PM with the headline "3.7 million kids may fall into poverty in January without child tax credit, study says."
