Child tax credit cash to start hitting parents' bank accounts Thursday

Beginning Thursday, hundreds of thousands of Wisconsin parents will start getting monthly payments of $250 or $300 per child as part of a temporary expansion of the federal child tax credit included in the latest COVID-19 stimulus package, known as the American Rescue Plan.

Continuing through December, the payments aren’t limited to families considered low income. Couples filing their taxes jointly and making up to $150,000 and single filers making up to $75,000 are eligible, and human services leaders, left-leaning policy experts and Democratic politicians hope the money is a first step toward something many other rich countries have been providing for years: regular payments to families to help them cover the significant costs of raising children.

“This all takes place in a country like ours with less upward mobility and less opportunity for kids now than in past,” said Tim Smeeding, who studies poverty as a professor of public affairs and economics at UW-Madison. He sees the payments as good public policy “based on the idea that kids are expensive, and society has a shared interest in seeing them thrive.”

Advocates for making the payments permanent say they would drastically reduce child poverty and spur a host of other societal benefits, but in a sharply divided Congress it’s far from clear backers will get to test those assertions.

“Republicans in particular have been eager to end extra unemployment compensation and will mostly be supportive of allowing the child tax credit to expire,” said UW-Madison political science professor Barry Burden. “It is always easier to let a popular program expire than to actively vote against it.”

He said the likelihood of renewing the payments is “near zero” if Democrats lose their narrow majorities in the 2022 midterm elections. Historically, the party in control of the White House loses Congressional seats in midterms.

Mike Nichols, president of the Badger Institute, a Milwaukee-based conservative think tank, called the payments “a big step backward” for poor families and taxpayers and compared them to the cash payments, “with no expectation whatsoever of work,” under the former Aid to Families with Dependent Children.

“Sure, the poverty rate might initially decline, but this does nothing to fundamentally give people the chance to rise up and escape dependency,” he said. And he called the payments a “really bad, cumbersome, over-complicated way to transfer money through the tax code.”

In a statement, U.S. Sen. Ron Johnson, R-Oshkosh, didn’t specifically reject making the payments permanent, but said that “in general, I don’t like to use the tax code for either economic or social engineering” and said he favored a flat tax structure without any credits.

Under the American Rescue Plan, the annual child tax credit was made fully refundable and went from $2,000 to $3,000 per child for children 6 to 17 and to $3,600 for children younger than 6. Most families will see half the credit show up automatically in their bank accounts over the course of the six-month program, although some will get paper checks. Next year, families will be able to claim the other half on their 2021 taxes.

Families who chose to opt out of the payments can claim the entire credit amount on their 2021 tax returns.

‘Something has to give’

Often referred to as “child allowances” in the at least 17 other affluent countries that provide them, direct, universal payments to families with young children help reduce poverty while improving children’s educational and health outcomes and making it less likely they will become involved in crime, Smeeding said.

Research he and others have conducted suggests that a combination of cash benefits, assistance with child care and work-encouraging policies such as the Earned Income Tax Credit can be most effective at reducing child poverty.

In liberal Madison, parents who spoke to the State Journal last week expressed support for the increased child tax credit or some other form of government assistance to reduce the costs of raising children, which has been pegged by the U.S. Department of Agriculture at about $234,000 per child over 17 years.

While their children swam Tuesday at the Goodman Pool in Madison, Ploeger and Shuda thought such monthly checks are a good idea if they help cut child poverty and hunger. Ploeger said he would “100%” support higher taxes on himself and others to pay for them.

“Families that might have greater need, I think it would have huge benefit for them potentially,” said Ploeger, whose children are 7 and 10. “The last thing we want is children going hungry in the midst of a very affluent city and a very affluent state and the most affluent country in the world.”

Shuda, whose children are 4 and 7, said that because her daughter was learning from home during the pandemic, she and her partner ended up paying more for child care last year, and that paying for child care for both when they were younger was very expensive.

With payments to families, “I think far more people would be able to work — that financial burden of covering child care’s really difficult,” she said. “A lot of people have to quit working to stay home.”

Gibba, a legal permanent resident from Gambia who’s been in the United States for 11 years, had not yet heard of the payments when the State Journal interviewed him at his East Side Madison home on Wednesday, but predicted they “will help a long way in providing for my family.” He said he works two jobs and lives with his wife and 15-year-old son.

Under the terms of the program, legal permanent residents are eligible for the payments.

Bednar said both she and her husband work full-time, and child care in Madison for their 5-year-old and 2-year-old is “just absolutely insane.”

“I think something has to give somewhere,” she said. “And so whether that’s a more permanent kind of credit coming into the parents or something that would help to lower that cost and subsidize it at the facility, I feel like something has to happen and that’s something I would support tax-wise.”

Hayley Chesnik, senior director of strategic collaborations at the United Way of Dane County, which works with and provides funding for a range of local nonprofits serving families and youth, said that, as the pandemic has stressed family budgets, the agency has seen a “large influx” of calls to its 211 help line for basic needs such as food, rent and utilities.

The payments give families “the power to make decisions about what’s best for them,” she said.

1.2M to benefit

Tamarine Cornelius, a research analyst with the liberal advocacy and research group Kids Forward, said more than 90% of children in Wisconsin will benefit from the tax credits, or about 1.2 million, including 94,000 who will be lifted either out of poverty or closer to the poverty line.

During an event Thursday in Madison to promote making the credit permanent, Kids Forward advocacy director Erica Nelson said many of those children are children of color, including 143,000 Latino children and 104,000 Black children in a state with some of the biggest racial disparities in the nation.

Expanding the credit “is one of the most important policy decisions that Congress can make in this decade,” she said.

Despite Democrats’ thin margins in Congress, U.S. Rep. Mark Pocan, D-Black Earth, said there were multiple paths for making the credit permanent, including inserting it into a bill that would only need 51 votes to pass in the Senate as part of the budget reconciliation process, or including it in an omnibus spending bill or a second infrastructure bill.

Sachin Chheda, of the liberal advocacy group Economic Security Project, noted that President Biden has called for extending it for four years, which would be less of a hit to a federal budget already seeing records deficits.

“If we can get a four- or five-year extension ... that at least extends the benefit in a way that reaches families and makes a difference, and it becomes harder to take away that benefit over time,” he said.