As the Biden administration embarks on its first hundred days, experts from the Gerald R. Ford School of Public Policy have produced a series of policy briefs on key issues. Download a PDF of this brief or read the web-formatted version below.
By H. Luke Shaefer, associate dean for research and policy engagement, Hermann and Amalie Kohn Professor of Social Justice and Social Policy; and Patrick Cooney, assistant director of economic mobility at Poverty Solutions
Overview
Child poverty in the United States is stubbornly high. Research from the National Academies of Sciences also finds that child poverty in the U.S. is much deeper than in peer countries. Households with children experience the highest rates of food and housing hardship of any age group, with Black and brown children disproportionately impacted.
COVID-19 exacerbated these challenges. CARES Act income support provisions stabilized poverty in the pandemic’s early months but did not do enough for families with children hit hard by lost employment, services, and school closures. The federal government should do more for families during the greatest public health and economic crisis of modern times.
Equity concerns about the existing Child Tax Credit
Two important federal programs in fighting child poverty are the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). However, families with low or no earnings fail to fully benefit from them, or are left out completely, leaving a gaping hole in our safety net.
Estimates find that one-in-three families with children in the U.S. do not receive the maximum CTC ($2,000) due to no or low earnings. Among Black and brown children, fully half live in families that don’t receive the full credit, compared to 23 percent of white children. Seventy percent of children in female headed households do not receive the full credit, compared to 25 percent in married households.
Transforming the Child Tax Credit into a Child Allowance
A broad group of poverty scholars support a proposal to effectively transform the Child Tax Credit into a child allowance by making it fully refundable—making the full credit available to families with no or very low earnings—and increasing the credit size. Such an expansion would recognize the challenges faced by poor and middle class families while reducing stigma and boosting political viability. Such a child benefit is the norm in many western nations and has been shown to effectively reduce child poverty.
The American Family Act of 2019 (AFA), sponsored by Senators Michael Bennet (D-CO) and Sherrod Brown (D-OH) and Representatives Rosa DeLauro (D-CO) and Suzan DelBene (D-WA) would reform the CTC to better support struggling families. AFA expands the maximum credit to $3,600 per year for children under 6, and $3,000 for children 6 to under 17; makes the credit fully refundable so extremely poor families receive the full benefit; and disperses funds monthly to address extreme income instability.
Estimates from Columbia University’s poverty center find that AFA would reduce child poverty by 45 percent, reduce poverty among Black children by 52 percent, 62 percent among Native American children, and would effectively eliminate the most extreme forms of child poverty.
Both the HEROES Act—which passed through the U.S. House of Representatives—and President-Elect Biden’s campaign tax plan call for an AFA-like expansion of the CTC during the pandemic. Senators Mitt Romney and Rob Portman have highlighted the possibility of bipartisan cooperation on this, and a group of conservative scholars recently expressed support for CTC expansion with full refundability.
Children have long been amongst the poorest in America. Strikingly, this evidence-based policy is supported by the President Elect, leaders in Congress, some members of both parties, and scholars across the political spectrum. Thus, even during uncertain times, the table is set to do something transformational for struggling families with children.
Citations
- National Academies of Sciences, Engineering, and Medicine 2019. A Roadmap to Reducing Child Poverty. Washington, DC: The National Academies Press.
- Edin, K. and Shaefer, H.L. (2015). $2.00 a Day: Living on Almost Nothing in America. Houghton Mifflin Harcourt.
- Organization for Economic Cooperation and Development Poverty Rate.
- Rodems, R. and Shaefer, H.L. (2020). Many of the Kids Are Not Alright: Material Hardship in the United States. Children and Youth Services Review, 112(May).
- Parolin, Z., Curran, M., & Wimer, C. (2020). The CARES Act and Poverty in the COVID-19 Crisis. Center on Poverty and Social Policy at Columbia University.
- Han, J., Meyer, B., & Sullivan, J. (2020). Income and poverty in the COVID-19 pandemic. Brookings Papers on Economic Activity.
- Schanzenbach, D., and Tomeh, N. (2020). Visualizing Food Insecurity. Northwestern University Institute for Policy Research.
- “Tracking the COVID-19 Recession’s Effects on Food, Housing, and Employment Hardships.” Center on Budget and Policy Priorities. (December 18, 2020).
- Shaefer, H.L., Collyer, S., Duncan, G., Edin, K., Garfinkel, I., Harris, D., Smeeding, T.M., Waldfogel, J., Wimer, C., and Yoshikawa, H. (2018). A Universal Child Allowance: A Plan to Reduce Poverty and Income Instability Among Children in the United States. Russell Sage Foundation.
- Collyer, S., Harris, D., and Wimer, C. (2019). Left Behind: The One-Third of Children in Families Who Earn Too Little to Get the Full Child Tax Credit. Columbia University Center on Poverty and Social Policy.
- Shaefer, A Universal Child Allowance.
- Morduch, J. and Schneider, R. (2017). The Financial Diaries: How American Families Cope in a World of Uncertainty. Princeton University Press.
- A Poverty Reduction Analysis of the American Family Act (2020). Columbia University Center on Poverty and Social Policy.
- “Conservative Scholars and Leaders Call for Expanded EITC and CTC for Families,” Institute for Family Studies. July 16, 2020.
