By Bria Overs
Originally appeared in Word in Black
Black children had a lot to gain from the expanded Child Tax Credit. In just six months, the credit lifted 2.1 million American children and an estimated 716,000 Black children under 17 out of poverty. As a result, the national supplemental child poverty rate hit a historic low of 5.2% overall, and 8.1% for Black children by the end of 2021.
However, the expansion’s success in impacting families needing help most was not enough to keep it around. Politicians feared the program was too costly and believed it deterred parents from finding employment. As such, Congress failed to make a deal to save it before expiring in December 2021.
Since then, the rate has more than doubled, with 17.8% of Black children living below the poverty line in 2022. It’s almost as high as the rate in 2019, before the COVID-19 pandemic, which was 20.3%.
Research and policy groups, like the Center on Poverty and Social Policy at Columbia University and Prosperity Now, point to the end of the 2021 expanded Child Tax Credit (CTC) for the quick reversal in poverty trends.
Researchers at the center believe that if the 2021 CTC was still in place the following year, “an additional 3 million children would have been kept above the poverty line in 2022 and much of the historic decline in child poverty of 2021 would have been preserved.”
But, the expanded CTC is only one piece to this puzzling problem, says the center’s Research Director, Sophie Collyer. The combination of stimulus checks and expanded unemployment benefits also helped families in need.
“We had the six months, we saw the historic low at 5.2% for child poverty, but because this was such a short-term opportunity, there are so many things that we have unanswered questions about,” says Alejandra Montoya-Boyer, director of policy at Prosperity Now.
How the Expanded Child Tax Credit Helped Children
The Child Tax Credit started in 1997 and gave a $400 credit per child under 17 to families. This amount was subtracted from the amount owed on federal income taxes. The program increased to $500 in 1999 and again in 2003 to $1,000 per child. Around this time, the tax credit became refundable, known as the Additional Child Tax Credit.
Through the 2012 American Taxpayer Relief Act, the credit became $2,000 with a refundable amount of $1,400 per child. Yet, the most significant change came nearly a decade later with the 2021 American Rescue Plan under President Joe Biden.
The plan changed the credit amount, increased the eligibility, made the credit fully refundable, and dispersed some of the credits through monthly payments, according to the National Conference of State Legislatures.
Families could receive up to $3,600 per child under 6 and $3,000 per child 6 to 17-years-old. It expanded eligibility for the full credit to include low- to moderate-income families with a threshold of $150,000 for two-parent households and $112,500 for single-parent households. And families received monthly payments of $250 to $300, depending on their children’s ages.
The monthly payments from the CTC helped reduce food and housing insecurity, and families reported having more ability to sustain their money each month. As a result, researchers from the Center on Poverty and Social Policy found 800,000 children were kept out of poverty from July to Nov. 2021.
Montoya-Boyer says that direct cash assistance is one of the best ways to reduce overall poverty, and the monthly payments from the expanded CTC prove it works.
“The monthly payment is critical — and recognizing that getting money at tax time is not sustainable for most families,” she says. “But if we can design a system in which we are meeting people’s basic needs through direct cash assistance, whether we call it guaranteed income or other forms of public benefits, at the end of the day, that’s what it’s really about.”
Families mostly used the monthly payments to pay for food, essential bills, clothing, housing, school expenses, and more. However, when the expansion ended, so did the progress in reducing child poverty.
In 2022, under the reversed CTC, Collyer says, 38% of Black children were no longer eligible for the full credit. They were either entirely ineligible or only partially eligible because their families’ income was too low.
Montoya-Boyer says Prosperity Now’s partners and community collaborators put forth a lot of effort to ensure more families were eligible to receive the CTC. But, with the short time for the expansion, some Americans were stripped of the opportunity to receive benefits.
“Maybe with more time, those numbers would have gone down even further,” she says. “We cut ourselves short.”