(Photo via The Pittsburgh Current)
State and local governments and small businesses are poised to net billions of dollars in benefits under the $1.9 trillion stimulus package that President Joe Biden signed this week, which aims to juice an economy that’s seen its inequalities widen during the COVID-19 pandemic.
But the stimulus package also has another big winner: children.
The sweeping legislation includes billions of dollars to support child care facilities, expand food assistance benefits, and send cash straight to families’ bank accounts.
Most of these payments are one-time cash infusions, meant to stabilize industries and households ailing from the pandemic shutdowns. The marquee benefit will come in the form of economic impact payments – or “stimulus checks” – that send up to $1,400 to taxpayers’ bank accounts.
But tucked inside is a major change to the federal tax code that’s poised to deliver a monthly child benefit to all but a sliver of America’s families – a policy that experts say could cut child poverty rates in half if it becomes a longterm fixture of American life.
Every year, the federal Child Tax Credit gives families a boost by reducing their federal tax bill. Those benefits will become bigger and more visible under the legislation Biden signed Thursday.
Families now will be eligible for up to $3,600 in tax breaks a year, nearly double the previous cap of $2,000.
And instead of granting the benefits in the form of an annual tax reduction, the Internal Revenue Service (IRS) will send them directly to families in the form of a monthly check: up to $300 per month for children under 5 years old, and $250 a month for those aged 5 and older.
Right now, the benefit is supposed to phase out in a year. But Congressional Democrats, expecting it’ll be popular, say they’ll fight to make it permanent.
Experts say the additional cash effectively amounts to a guaranteed income for families with children, which will help thousands of families rise above the poverty line and stabilize even more teetering on the edge.
“What we’ve done is recognize that there is a cost to raising children that is beyond what many people earn, but children should not suffer because of that,” Donna Cooper, executive director of Public Citizens for Children and Youth, a child advocacy group based in Philadelphia, told the Capital-Star. “We see a pro-life, pro-family, pro-child policy that has radical implications.”
“It’ll get you anything”
Nearly one in five Pennsylvania children live in poverty – a total of 435,000 kids in 2020, according to data from the Annie E. Casey Foundation. Thousands more live in households that float above the poverty line, but still have a hard time paying for basic necessities like food, shelter, clothing and transportation.
The United Way of Pennsylvania estimates that 1.3 million such households in the state struggled to afford basic necessities at the start of 2020. That number had grown to an estimated 2 million by August.
“The impacts [of the pandemic] hit harder and faster for lower income families,” Kristen Rotz, executive director of the United Way of Pennsylvania, said. “They lost work more quickly, fell behind on household costs, and even if they continued to work, they had child care challenges.”
Many of these families are likely eligible for direct cash assistance in the form of food stamps or rental subsidies. What sets the new child tax credit apart is that the money comes with no strings attached – it’s up to families to decide how to use it.
“Cash is the most flexible source of support you can give a family,” Rotz told the Capital-Star. “Food stamps will get you a certain amount of food, but cash will let you pay down debt, acquire a used car, pay back your landlord – it’ll get you anything.”
Rotz pointed as an example to a typical cash-strapped family in rural Potter County, which lies along the New York-Pennsylvania border. Two adults with a pair of children there can expect to spend $808 each month on transportation, data from the United Way show – more than they might spend on rent or child care bills.
That family could cover three-quarters of its transportation costs with the $600 in monthly checks it should receive under the new tax credit plan. An identical family in Philadelphia, meanwhile, could cover almost half its monthly rent.
Cooper pointed out that an extra $3,600 each year won’t be enough to uplift children living in deep poverty, such as those whose parents earn the minimum wage. Biden’s stimulus plan originally contained a provision boosting the federal minimum wage to $15 from its current $7.25.
But for thousands of families, it could help avert catastrophe when an unexpected medical bill or car repair comes due. For others, the extra cash may allow them to make purchases they’d been deferring or return to the trappings of a pre-pandemic life.
Take Williamsport resident Malissa Watson, who was an assistant manager at a gym before COVID-19 hit. Her gym shut down after Wolf issued a stay-at-home order last year, and her position was eliminated when it reopened.
Watson said she accepted an offer to work fewer hours at a lower wage, hoping it would change when the pandemic lifted. One year after the first shutdown orders, that hasn’t happened. She’s had “no luck yet. I am living on about half of my pre-pandemic income,” she told the Capital-Star.
As a mother of a 15-year-old son and 11-year-old daughter, Watson is poised to get up to $500 a month under the plan Biden signed this week. She knows exactly how she’d spend it: restarting music lessons for both her kids and buying new glasses for her daughter.
“Parents in Pennsylvania are making hard choices – I’m talking about filling prescriptions versus buying dinner,” Cooper said. “With this [policy], we’re ending the tradeoffs that accrue hardships to children.”
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