‘Huge flip of circumstances’: end of US child tax credit pushing kids into poverty

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Andrea Knauber used the money to pay for more nutritious food and cover the fees for her daughter’s dance classes. Melissa Lester spent the checks on birthday and Christmas gifts for her daughter, and to take the first holiday of her life.

“My family never went on family vacations or anything, and 2021 was the first time that I had done anything like that. And we got to go to the beach,” said Lester, a 38-year-old social worker in Ohio.

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Then the money stopped coming and the financial situations of Knauber, Lester and millions of other Americans grew precarious once again.

Last year, Joe Biden and Congress’s Democratic leaders agreed to allow even the poorest American parents to receive a tax credit of a few thousand dollars a year. What followed was a dramatic fall in the child poverty rate, which dropped by nearly half to its lowest level ever, according to the Census Bureau.

Just months after it was enacted, the expanded child tax credit expired amid the objections of Republicans and an influential Democratic senator. By the start of this year, millions of American children had slipped back into poverty.

“Once January 2022 hit and the monthly deposit did not hit families’ bank accounts, we saw an immediate sort of reversal, and there were 3.7 million more children in poverty in January 2022 compared to December 2021,” said Megan A Curran, director of policy at the Center on Poverty and Social Policy at Columbia University. “And so that’s a huge flip of what the circumstances were for kids.”

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With only weeks remaining until they lose control of the House of Representatives to a new Republican majority, Democrats are in last-minute flurry of bill-passing, and a group of lawmakers believe they have found the leverage they need to restore the child tax credit.

The Democratic senators and representatives are proposing something of a trade: their votes to extend corporate tax breaks enacted by Donald Trump and the Republicans, but only if the expanded child tax credit is restored.

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“We should not provide any of these extensions unless it’s coupled with an extension and expansion of the child tax credit. If businesses and corporations can get the benefit of this, working families, middle-class families, vulnerable families, need to have a child tax credit,” the Democratic congresswoman Rosa DeLauro, a longtime proponent of expanding the credit, told the Guardian.

The child tax credit has been on the books since 1997, but Biden’s American Rescue Plan legislation expanded it by allowing the poorest families, even those who pay no federal income tax, to receive it for the first time. The law also paid the credit out monthly in the last six months of 2021, and increased the total credit to $3,600 a child under the age of six and $3,000 a child up to the age of 17 – all policies that researchers say made it much more effective in countering child poverty.

“It’s not enough money to be a big disincentive to work. It is enough money, though, to allow someone to pay a copay on a childcare bill or afford transportation,” said Elaine Maag, senior fellow at the Urban-Brookings Tax Policy Center. “It is enough money to, sort of, enable work in some cases.”

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Knauber, a 39-year-old Florida public school teacher, used her monthly payments of about $200 to send her daughter to dance classes three times a week and pay for her to attend competitions, both of which helped the 12-year-old deal with mental health issues. But since the credit has expired, a family friend has had to cover the costs of her daughter’s classes, which she can only attend once a week, and her food budget has grown so tight they sometimes have had to rely on ramen noodles for lunches.

“I have like three different credit cards that sustain my family,” Knauber said.

Despite the evidence of its success, the credit expansion was stripped out of a major spending bill after the Democratic senator Joe Manchin, whose vote would be necessary to get any legislation through the chamber without Republican support, insisted recipients must be working.

A group of Republicans senators have proposed their own version of the credit expansion, but their policy would leave out the poorest Americans. It is also unclear if it would get the votes needed from GOP lawmakers, who have long argued such programs discourage work.

“The concern from the folks on the right is that it’s actually going to make it harder for those kids to have a pathway out of poverty, because we know that work is important for a healthy environment and in helping kids thrive,” said Patrick T Brown, a fellow at the conservative Ethics and Public Policy Center.

Beyond allowing her family to afford luxuries they could not before, Lester says she saved up some of the $350 checks that arrived each month in anticipation of her second daughter, who was born this year. But with those payments gone and prices for essentials like infant formula high, Lester is wondering how a family like hers is supposed to make it. She is paid about $72,000 a year, and her children’s father recently started a new job with a decent salary, but Lester doesn’t expect to be able to afford a vacation this year, or much more than hand-me-down clothes for her kids.

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“I’ve been wondering more and more, how is everybody really getting by?” Lester said. “By the standards … we’re middle class, but [we] really feel a crunch right now, and it doesn’t feel like it.”

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