Expiration of child tax credits hits home in West Virginia

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(journalist)
– For the first time in six months, families on Friday are going without a monthly installment of the Child Tax Credit – a program that was meant to be part of President Biden’s legacy but instead came across as a sticking point flash on who is worthy of government support. The monthly tax credits were part of Biden’s $1.9 trillion coronavirus relief package – and the president had proposed extending them for another full year as part of a separate measure focused on economic and social programs. But Democratic Sen. Joe Manchin has opposed extending the Broad Credit, fearing the money will discourage people from working and that any additional federal spending will fuel inflation that has already peaked near 40 years. From the AP:

  • “The credit had been a ‘godsend’. Retired Andy Roberts, of St. Albans, WV, Manchin’s home state, relied on the checks to help raise his two young grandchildren, whom he and his wife adopted because birth parents recovering from drug addiction. The Roberts are now at $550 a month. The money helped pay for Girl Scouts, ballet and acting classes, and children’s shoes, which Roberts says are more expensive than adult shoes. The tax credit, he said, was a “godsend.” “It will force you to tighten your belt, if you have anything to tighten,” Roberts said of the loss of payments.
  • Credit size is reduced. Families only received half of their 2021 credit on a monthly basis; the other half will be received once they file their taxes in the coming months. The amount of the credit will be reduced in 2022, with full payments only going to families who have earned enough income to owe taxes, a policy choice that will limit benefits for poorer households. And the credits for 2022 won’t come until people file their taxes early the following year.
  • Researchers said it could reduce child poverty by 40%. The researchers said the credits improved outcomes for poor children, whose families previously couldn’t access the full tax credit because their incomes were too low. An analysis by the Urban Institute estimated that extending credit as developed by the Biden administration would reduce child poverty by 40%.
  • “We will have to learn to adapt. West Virginia families interviewed by the AP pointed to rising grocery and gas bills and said they will have to make do with less of a financial cushion than a few months ago. “You’re going to have to learn to adapt,” said Roberts, who worked as a car dealership for five decades. “You never really dreamed that everything would suddenly blow up. You go downstairs and get a packet of hamburgers and it’s $7-8 a pound.” According to IRS data, 305,000 children in Virginia -Western benefited from the expanded credit last month.
  • 36 million families received payments last month. By the Biden administration’s calculations, the expanded child tax credit and its monthly payments were a political success that brought in $93 billion over six months. More than 36 million families received the payments in December. Payments were $300 per month for each child five and under and $250 per month for children ages 6 to 17.
  • Credits didn’t downsize. The tax credits did not cause an immediate exodus of the labor force, as some legislators had feared. The Bureau of Labor Statistics reported that the percentage of people with jobs fell from 58% the month before monthly payments began to 59.5% last month. This same trend occurred in West Virginia, where the employment-to-population ratio reached the pre-pandemic level of 52.9%. There is academic debate over whether credit could suppress long-term employment, with most studies suggesting that the impact would be statistically negligible.
  • Manchin’s Alternative. One of the key questions for policy makers is whether bureaucracies or parents are better off spending money on children. Manchin proposed a 10-year funded version of Biden’s economic proposal that would remove the focus on child tax credits and instead fund programs such as universal pre-kindergarten, to avoid sending money. money directly to families. “It’s a moral question whether you trust families to make their own decisions,” says Katherine Michelmore, associate professor of public policy at the University of Michigan.

(Read more stories about the child tax credit.)

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