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The biggest policy of the 2024 election
And can the Child Tax Credit reduce child poverty in the US?
As the 2024 election approaches, we’re hearing Democrats and Republicans say:
“The other side doesn’t have any policies!”
Despite their many differences, VP Kamala Harris and former President Donald Trump have both said that the government needs to do more to support parents and young families.
So, what are their campaigns proposing to do about it?
Harris’ campaign recently came out in favor of an expanded child tax credit, a policy that Trump’s VP pick J.D. Vance has also spoken in support of.
It’s a policy that has been effective in reducing childhood poverty, and politicians on both sides of the aisle are increasingly seeing it as a way of helping young families amidst a cost-of-living crisis.
So, what is the child tax credit?
The Child Tax Credit (CTC) is a policy that (currently) provides families with up to $2,000 in tax relief per child annually.
It was designed to ease the financial burden on parents, allowing them to spend more of their money on their kids instead of taxes.
Basically, that means that American families can reduce their tax bill by $2,000 per year per child.
CTC Timeline:
1997: The CTC was passed by Congress & then-President Bill Clinton.
At the time, it provided middle-class families with a $500 tax credit per child.
2001: The CTC was expanded by the Bush Administration to reach $1,000 per child by 2010.
2017: It was expanded in 2017 by former President Trump's Tax Cuts and Jobs Act.
The total increased to $2,000 per child, and more families became eligible for the credit.
2021: The biggest expansion of the CTC came with President Biden's American Rescue Plan.
This (temporary increase) brought the CTC up to $3,600 for children under age 6 and $3,000 for children up to age 17.
Most importantly, the 2021 version of the CTC would pay out half of the benefit directly to families as cash payments.
This cash benefit was paid out through direct deposit, giving monthly payments of $300 per child month to millions of young families across the U.S.
After this went into law and the money was being paid out, something amazing happened: more than 2 million American children were lifted out of poverty.
The tragic thing is that this CTC expansion was temporary, and child poverty returned to pre-pandemic levels after the CTC expired in 2022.
The White House estimates that more than half of the increase in child poverty from 2021-2022 can be attributed to the expiration of the CTC expansion.
Despite the expiration of the expanded CTC payments, 46 million families claimed the CTC in 2022 — covering about 90% of American families with kids.
The future of the CTC:
VP Harris recently spoke of her plans to expand the CTC if she wins the presidency:
We will provide $6,000 in tax relief to families during the first year of a child's life.
That is a vital year of critical development of a child, and the costs can add up - especially for young parents.
She also said that she wants to restore the pandemic-era program that provided families with up to $3,600 in payments per child annually.
J.D. Vance has also said that he supports an expansion of the CTC to $5,000 per child.
Both plans would cost somewhere between $2 to $3 trillion over the next decade, according to experts.
But these programs can help to grow the economy and — in the long-run — they can indirectly pay for themselves.
Economist Mary Eschelbach Hansen of American University explains:
If you have young children and want to know whether you’re eligible for the CTC, check out the Child Tax Credit page on the IRS website to find out.
If you don’t have kids, it’s still good to know about the CTC. It’s an effective way of reducing child poverty, and we’ll probably be hearing more about it regardless of who wins the election this November.
ART OF THE DAY
Saint Catherine of Alexandria by Carvaggio. 1598.
