Benefit seen as an effective weapon in fighting poverty
By DAVE SOLOMON, Granite State News Collaborative, NH Business Review
A retired gentleman raising his 13-year-old grandson in Manchester.
A homeless man with a 9-year-old daughter in Concord.
A mother of two whose husband works as a parts manager for an auto dealer in Nashua.
These households were among the estimated 130,000 in New Hampshire to benefit from the expanded child tax credit, a feature of the American Rescue Plan Act passed by Congress in March 2021.
That law made the existing tax credit of $2,000 more generous by increasing the amount per child and broadening the eligibility. The legislation also made the credit refundable, meaning it was not just a credit against taxes owed, but would be paid to families with little or no income and therefore little or no tax liability.
Unlike the existing tax credit, which was applied only after taxes were filed, the 2021 expansion made half of the credit available in advance to eligible families in the form of monthly checks from July to December 2021. The checks totaled $300 a month per child under age 6 and $250 for children ages 6 through 17. The other half of the credit was paid after tax returns were filed.
The eligibility guidelines were also quite generous, with maximum annual income of $75,000 for a single individual, $112,000 for head of household, and $150,000 for those married filing jointly. More than 36 million American households received checks during the six-month program.
The expansion of the child tax credit proved enormously popular, so much so that Senate Minority Leader Mitch McConnell, R.-Ky., was reportedly concerned that Republicans would have a hard time revoking it if they took over the majority in the House of Representatives in 2023.
Expansion expired
It turns out his worries were premature. The expansion expired at the end of 2021 as Democrats were unable to muster 50 Senate votes for their Build Back Better plan, which extended the enhanced tax credit for another year. Opposition from Sen. Joe Manchin, D-W.Va., proved insurmountable as Democrats in a 50-50 Senate had no votes to spare.
While Democratic leaders are hoping Manchin can be persuaded, he has said he won’t support renewing the expanded credit without including work requirements, prescription drug savings and changes to the tax code to pay for it all.
Republican Sen. Mitt Romney, R-Utah, is promoting his Family Security Act, which would bring back the direct monthly payments but add stringent work requirements, cut funding to other social safety net programs and make changes to the tax code.
Some are hopeful that a deal can be reached, given the popularity of the program and its impact on reducing child poverty.
“There’s so much that we all agree on that we ought to be able to get a deal,” Sen. Elizabeth Warren, D-MA, recently told Politico.
Others are less optimistic. Shai Akabas is director of economic policy at the Bipartisan Policy Center, which has proposed a program focused on families at the lower end of the income spectrum.
“It seems fairly unlikely that they are going to reach an agreement in advance of the November election to expand the CTC for the current year,” Akabas recently told CNBC. “There’s no clear path to an agreement at this moment.”
Holding out hope
Carey Gladstone, senior director of asset building strategies at Granite United Way, is among those holding out hope that the enhanced tax credit can be extended and in some fashion made permanent.
“I don’t have a crystal ball, but we are continuing to stay in touch with our congressional delegation and their staff,” he said. “And they’ve been very supportive of these enhancements being continued. But it’s important to remind people these tax credits already existed in some form, so even if they are not continued with the enhanced version people should still make sure to claim their credits.”
Gladstone manages the Granite United Way’s VITA program (Volunteer Income Tax Assistance), which assists low- to moderate-income households in their tax filings, with the particular aim of ensuring they obtain the tax credits for which they are qualified.
He recalled meeting the retired gentleman raising his grandson at a Manchester VITA site.
“He was living on Social Security, so the child tax credit was a huge boon to him in trying to support the grandson,” said Gladstone. “A poignant moment came for him when he asked about prior-year filings. I said, no, this was implemented by Congress as a one-year enhancement, but you may be able to get it in future years if Congress extends the enhancement.”
One homeless man who saw a VITA presentation at the Families in Transition shelter in Manchester reached out to the organization.
“He had a B.A. and was computer-literate,” says Gladstone, “but there were extenuating physical and mental health issues that kept him from getting a job and putting a roof over his head for him and his 9-year-old daughter. I walked him through filing and followed up later. He told me he’s now thinking about buying a house. A year ago, he was homeless, and now with the help of this tax benefit he has some confidence to go back to work.”
Impact on poverty
Phil Sletten, senior policy analyst at the NH Fiscal Policy Institute, cites a number of studies suggesting that the direct payments had a significant impact on childhood poverty in New Hampshire.
“The Center on Budget and Policy Priorities calculated that 85 percent of New Hampshire children, or approximately 221,000 children, would benefit from the CTC expansion if made permanent beyond 2021, and that child poverty would be reduced by 39 percent in the state,” he wrote in an NHFPI report.
The report noted that, in 2021, “advance payments of the CTC reached 133,000 filers in New Hampshire, benefitting households with 217,000 children. The average advance CTC monthly payment amount in the state was $414. From July through December 2021, approximately $320 million has flowed into the state due to the CTC through these monthly payments.”
The popularity of the program has been due, in part, to its broad reach into the middle class.
Margery and her husband John live in a modest but comfortable home in a nice Nashua neighborhood with a household income of about $125,000, below the threshold of $150,000 to qualify for the CTC.
Margery, who didn’t want her real name used in a discussion of family finances, said the $500 monthly payment, $250 for her 11-year-old daughter and $250 for her 15-year-old son, “definitely took a lot of pressure off us.”
Some of the money was used to pay lingering medical bills, “but we were able to do some fun things with the kids over the summer and not feel as guilty about spending a little more,” she said.
A bit of a break
Margery realizes that discussions are underway that could leave her family out of any future CTC enhancements, which may include lower levels of income to qualify, and she’s fine with that.
“I think it will be beneficial to a lot of people,” she said. “Even if it isn’t my family benefiting from it, I like the idea of it for those who are even lower income. It gives them a little bit of a break. We’ve had some friends who were very thankful for it because it allowed them to help pay for child care and stuff like that.”
The fact that families with income up to $150,000 qualified for the enhanced credit is one of the reasons it should not be renewed in its current form, said Andrew Cline, president of the Josiah Bartlett Center for Public Policy, a Concord-based libertarian think tank.
“This is yet another program that’s really a middle-class benefit that’s pitched as an anti-poverty program. If it were just an anti-poverty program, it would be much less costly and you could probably administer it in a more efficient way,” says Cline. “But it’s not. It’s part of this whole federal scheme to buy votes by handing out money to voters.”
Cline argued that so much money is wasted in administering the nation’s antipoverty and safety net programs, with bureaucracies to monitor eligibility, compliance with complex rules, expenditures and audits, that direct cash assistance, or so-called “minimum income,” may well be a more efficient and effective option.
A modified version of the enhanced child tax credit, with corresponding reductions to other welfare programs, would be “in that spirit,” he said. “You get the money; all you have to do is verify your income and that you have a kid.”
More bang for the buck
According to Cline, a consensus is emerging that the bureaucracy and apparatus of the nation’s welfare system is ineffective, inefficient, wasteful and intrusive.
“So what if we dismantled the apparatus and just gave people cash to spend as they want?” he said. “I’m not advocating that; I’m just saying that’s growing in popular ity at both ends of the political spectrum, and the reason is this massive bureaucracy is clearly inefficient and wasteful and isn’t achieving the goals we want it to as effectively as we want it to.”
From his perspective, Cline sees some version of the CTC expansion emerging from Congress in the months ahead.
“Mitt Romney has his plan, Democrats have their plan, and I think eventually you’re going to see some sort of agreement on some sort of child subsidy, whether that comes in the form of a tax credit or direct payment, I think that’s where things are headed.
New Hampshire’s senior senator, Democrat Jeanne Shaheen, is hoping everyone will “meet in the middle.”
“We’ve seen the difference enhancing the Child Tax Credit made for the financial stability of New Hampshire families, which is why it is so important that Republicans work in good faith with Democrats to bring it back,” she said in a statement.
“Especially as working families stretch household budgets to keep up with inflation, surging gas prices and limitations due to supply chain shortages, every effort must be made to help them make ends meet. It is past time that Republicans in Congress meet Democrats in the middle to respond to the needs of working families.”
These articles are being shared by partners in The Granite State News Collaborative as part of our race and equity project. It was edited by NH Business Review, a partner in the collaborativeFor more information visit collaborativenh.org.