The American Rescue Plan Redefines Child Poverty as a Societal, Rather Than Individual, Challenge
Public debate on the root causes of child poverty has often focused on individual—usually parental—behavior. This means that safety net policies have often concentrated on encouraging or discouraging certain behaviors among parents and caregivers, usually through program eligibility requirements like minimum work hours or citizenship, rather than focusing on societal obstacles to alleviating poverty.
The American Rescue Plan represents a dramatic departure from this individual-focused understanding of child poverty because of a subtle, but critical, detail in how it delivers a key tax credit to families: The legislation expanded the Child Tax Credit (CTC), a program that uses children themselves as the basis of eligibility for key benefits, instead of determining whether children are eligible to receive benefits based on requirements (e.g., work, citizenship, etc.) that only their parents can meet.
For example, the expanded CTC no longer has a minimum earnings requirement, which means that 23 million children who were previously excluded from the CTC because their families earned too little to qualify are now eligible to receive the credit. In addition, the CTC is now fully refundable, which means that families who have little or no tax liability can receive the credit (or the difference between the credit and any taxes owed) as cash back from the government. In other words, the new CTC is essentially akin to a direct cash transfer and operates like a guaranteed income for eligible children, and is now paid in monthly installments (rather than one lump sum at tax time) to help cover children’s needs throughout the year.
Because the CTC uses children as the basis for eligibility, and because it uses a child’s (not their parent’s) citizenship status to determine benefit eligibility, the program also has the potential to reach more children than even the Earned Income Tax Credit (EITC). The EITC, unlike the new CTC, does have a minimum earnings requirement and requires all members of the family receiving the credit to have a Social Security Number. In addition to now reaching the 23 million children whose families’ incomes were previously too low to qualify, the CTC also has the potential to reach approximately 4 million U.S.-citizen children of Individual Taxpayer Identification Number holders who are not currently eligible for the EITC.
Recent Research from Child Trends on Poverty
- Families with children are struggling to pay for housing across the country, which is especially concerning as we approach the end of the current federal eviction and single-family foreclosure moratoria on June 30, 2021. In 26 states, 22 to 31 percent of households with children surveyed from January 6 to March 29, 2021 reported little or no confidence in their ability to make their next housing payment.
- Young adults ages 18 to 24—especially young adults of color—have struggled to pay expenses during the pandemic. Across the United States, 3 percent of Black young adults and 46.4 percent of Hispanic young adults reported that paying household expenses was somewhat or very difficult from April 2020 to February 2021, as did 42.8 percent of young adults who identified as a race other than Black, White, Hispanic, or Asian. By comparison, 32.7 percent of White young adults and 31.4 percent of Asian young adults reported that paying expenses was somewhat or very difficult during the same time period.
- New analysis of data on poverty in 2020 shows that the pandemic’s economic hardships have fallen disproportionately on Latino children, Black children, and children in female-headed households. In 2020, 700,000 more Latino children and 268,000 more Black children lived in poverty in the United States than in 2019; there were also 642,000 more children in female-headed households living in poverty than in 2019.