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The Child Tax Credit Has Helped Countless Families Survive the Pandemic. Now Its Future Is Uncertain.

The expanded child tax credit created via the American Rescue Plan saved thousands of American families from economic hardships such as job loss and lack of child care during the pandemic. Despite concerns that these payments could cause taxpayer dollars to go to waste or discourage people from seeking or returning to work, early data returns appear to show that the extra monthly income has gone to support the immediate needs of American family budgets.

The child tax credit was changed in three essential ways this year by the American Rescue Plan: The amount grew from $2,000 to as much as $3,600; recipients could sign up to obtain the money monthly rather than annually; and it became fully refundable, which made even the lowest-income Americans eligible. The monthly payments signaled another significant change, with the first installment hitting bank accounts July 15th and at the same point each month after. Families receive $300 per child under 6 years old, or $250 per child 6 to 17. The next payment goes out Friday.

Of all the historic expansions created by the Biden Administration during the pandemic, this is one Democrats hope to cement in President Joe Biden’s social spending bill for at least five more years. Amid political gridlock, there are concerns over the legislation’s future and for the Democratic majority if they fail to pass it.

The Census Bureau has maintained a household survey to probe how recipients are using the child tax credit, and it seems most families are putting it toward their most essential bills. In the week after the first monthly payment in July, it found that 29 percent of households used the extra cash on food, clothing, utilities, school supplies, and books, tuition, or their rent or mortgage. An additional 10 percent put it toward a vehicle payment, household debt, or savings. That first group of households spending on food, clothing, and more grew to 35 percent in the most recent survey, and those putting it toward debts or savings remained steady at 10 percent.

This money, experts say, has added a buffer to family budgets each month, providing low-income parents and children an opportunity to plan their finances and their future. Critics maintain, however, that the changes to the child tax credit could create fiscal, economic, and administrative hardships in the long term if made permanent.

Concerns over the costs of the benefit have led Republicans to stonewall making the expansion permanent and debate among centrist Democrats. There is also concern that even a few hundred dollars a month could provide enough financial stability to discourage potential workers from entering or re-entering the labor market. This has created a greater degree of economic agitation as the country faces a labor shortage, affecting a number of industries that have relied on low-income workers.

Advocates and economists note, however, that a positive impact is already evident, pointing to data that appears to show a major dent in the nation’s childhood food insecurity and poverty rates since monthly payments started going out in July.



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