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Category: Chid tax credit

  • Child Tax Credit Opens the Door for UBI

    Biden’s stimulus plan contains an experiment in Universal Basic Income. The bill’s child tax credit has the potential to change the way that the United States addresses poverty.

    By Sheelah Kolhatkar

    On Tuesday, March 9th, Amy Castro Baker stood on her front porch and watched as her two teen-age children boarded a bus and went off to school together for the first time in a year. Her sense of relief was profound. Baker, a researcher of economic mobility and an assistant professor at the University of Pennsylvania’s School of Social Policy & Practice, had been through a challenging period familiar to most parents—and especially to working mothers. For the past year, she had balanced the demands of a full-time job with overseeing her kids’ online schooling, while also cooking, cleaning, and running the household as a single parent.

    “We’re at the point in my home where it’s a choice between what’s higher risk, covid or my kids’ mental health,” Baker said. “I’m not sure I could have handled another month.”

    These are the kinds of difficulties that the American Rescue Plan, the $1.9-trillion pandemic-relief bill recently passed by Congress, was designed to address. Benefits in the bill could help millions of families who are facing similar challenges and are living under much greater financial precarity.

    The bill, which was signed by President Joe Biden on Thursday, offers a variety of benefits intended to address economic hardship caused by the pandemic.

    No Republicans voted for the legislation, largely based on the argument that the pandemic will end soon and the economy doesn’t need the help. And it’s true that some aspects of the legislation go beyond the demands of the pandemic, addressing economic disparities that existed before covid-19 hit. The bill includes provisions to give one-time, fourteen-hundred-dollar payments to individuals earning fewer than eighty thousand dollars a year, and to increase unemployment insurance by three hundred dollars per week until early September.

    But it is the plan’s expanded, fully refundable child tax credit—which is worth thirty-six hundred dollars for each child under age six and three thousand dollars for those aged six to seventeen—that has the greatest potential to change the way that the United States addresses poverty.

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    Sheelah Kolhatkar is a staff writer at The New Yorker, where she writes about Wall Street, Silicon Valley, economics, and politics. She is the author of “Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street.”

    To see original article please visit: https://www.newyorker.com/business/currency/joe-bidens-stimulus-plan-contains-an-experiment-in-universal-basic-income?utm_source=nl&utm_brand=tny&utm_mailing=TNY_Daily_031521&utm_campaign=aud-dev&utm_medium=email&bxid=5bd66f832ddf9c6194388f0d&cndid=21862528&hasha=4b8351c39eab9a607e0729efcc51c26d&hashb=f76512918a8feeca6884ef8539e55ed2daa041a9&hashc=89b19f33b8b780fe458223e541d60addc12272dcbac4e272bb9cfbcd8ddd1214&esrc=AUTO_PRINT&mbid=CRMNYR012019&utm_term=TNY_Daily

    The post Child Tax Credit Opens the Door for UBI appeared first on Basic Income Today.

    This post was originally published on Basic Income Today.

  • Opinion: The new monthly child benefit shuts the door on Reagan’s punitive welfare legacy

    How government-provided cash gives people the tools to solve their own problems.

    By Aisha Nyandoro and Natalie Foster

    As President Joe Biden prepares to sign the American Rescue Plan, a surprising bipartisan hero has emerged: the Child Tax Credit. The new law will nearly double this already-existing credit for one year and send $250 to $300 per child every month to almost every family in America. Biden and Democrats in Congress have expressed support for making these changes permanent. And the enthusiasm for the policy extends across the aisle, with Senator Mitt Romney (R-UT) introducing his own version. 

    For those of us working in economic policy, this is nothing short of revolutionary—a guaranteed income for families with children is estimated to cut child poverty in half, bringing close to 5 million American children out of poverty.

    It is a major step forward to leave the punitive welfare system of the past four decades in the past, and instead embrace the simplicity and efficacy of unconditional cash.

    Much of the foundation for the insufficient and conditional nature of our current benefits system can be attributed to GOP idol Ronald Reagan. His administration paved the way for a generation of conservatives to eviscerate the social safety net by fear-mongering about fraud and waste by the poor, all while slashing taxes on the wealthy. Decades of policy were shaped by this false narrative, which is still evident in conservative hand-wringing over whether pandemic aid was too generous to minimum-wage workers struggling to survive through COVID-19.

    Aspects of the Reagan era can be seen in where the original Child Tax Credit fell short: it shows our limits on who we think is deserving.

    It did not go far enough in addressing the needs of the full family—for example, a disabled adult under a parent’s care, or an aunt without children whose lost her job due to COVID. What makes the new Child Tax Credit remarkable is the fact that it is unconditional—no complicated hoops to jump through or minimum income requirements of parents. Families will simply receive checks.

    With the dual crises of racial injustice and a virus response only now being taken seriously by a new White House, Americans must finally rid our politics of the poisonous ideology surrounding poverty in the U.S.

    For far too long, we’ve been sold a reductive story that people are poor because they don’t work hard and deserve to be.

    That people who are wealthy are rich because they work hard and deserve to be.

    This morality tale is a lie. Who is working harder—the CEO who leaves the office at 5 p.m. or the cleaner who spends the night scrubbing down the office? The truth is, our economic system has been engineered to funnel wealth to the very top, while the working class pay the price. The pandemic has illustrated the stark results: the collective wealth of America’s billionaires has grown by 36%—$1 trillion—while eight out of 10 U.S. households earning under $50,000 are still having difficulty meeting basic needs each week. We need to build an economy that recognizes a person’s inherent worth and ensures that we are all given the opportunity to not just survive—but thrive.

    The path to shared prosperity and common-sense policy should begin where the need does—within the community. We see how this pays off in a program like Magnolia Mother’s Trust in Jackson, Miss. It was developed through a process that was created based on the needs of the families living in subsidized housing it serves. Potential recipients had similar stories of waiting for hours at government offices to “prove” they were still poor, being penalized in lost benefits if they were able to scrape together a semblance of savings to try and get an apartment in a safer part of town. When asked what would help them achieve economic stability, the answers ranged from owning a reliable car to get to work to coming up with tuition money for their last semester of community college.

    The challenges were individual, but the solution was universal: cash. 

    The “radically resident-driven” nonprofit, Springboard to Opportunities, developed a program to provide a group of mothers $1,000 a month for a year. The results were more promising than any job training or budgeting seminar. The initial 20 recipients paid off $10,000 in predatory debt. The amount of meals made at home versus picking up fast food or takeout more than doubled. At the end of the first year, all the participants said they were able to pay their basic needs. Now expanded to 110 mothers, the second year is about to wrap up. While the data will take some time to collect, the money was crucial—the first payments went out on March 15, 2020, just as the U.S. was entering lockdown.

    One mother, Mimi, saw her hours as an Olive Garden server evaporate overnight. Unemployment insurance was slow and unreliable. She didn’t have health insurance, and worried about going back to work once the restaurant resumed service. The $1,000 from the program was the only steady source of income she had to care for herself and her children. 

    There are millions of Mimis across this country, and they deserve help—not judgment.

    Policies like the Child Tax Credit and recurring direct checks can provide them the agency and choice they need to do what’s best for themselves and their families. This pandemic has shown what we know to be true: cash gives people the tools to solve their own problems. Direct cash payments have driven poverty reduction and boosted local economies, but perhaps most important—cash has been a lifeline for people to meet basic needs and fill in the gaps in their own personal safety nets. 

    It’s time to relegate Reagan-era welfare policy to the history books and follow the new trail blazed toward equity, trust and dignity we are seeing U.S. leaders finally embrace.

    _____

    Aisha Nyandoro is the CEO of Springboard to Opportunities and the founder of the Magnolia Mother’s Trust guaranteed income program. Natalie Foster is co-chair of the Economic Security Project.

    To see original article please visit: https://www.marketwatch.com/story/covid-relief-package-lifts-millions-of-children-out-of-poverty-and-shuts-the-door-on-reagans-punitive-welfare-legacy-11615407139

    The post Opinion: The new monthly child benefit shuts the door on Reagan’s punitive welfare legacy appeared first on Basic Income Today.

    This post was originally published on Basic Income Today.

  • Senate Passes $3,000 Child Tax Credit for 2021

    The American Rescue Plan would temporarily expand the child tax credit for 2021: allowing 17-year-old children to qualify, increasing the credit to $3,000 per child removing the $2,500 earnings floor, making the credit fully refundable and allowing half of the credit to be paid in advance through periodic payments from July 2021 to December 2021.

    By Joy Taylor

    An expanded child tax credit for 2021 is about to become law. After some procedural wrangling, the Senate narrowly approved President Biden’s stimulus package to help tackle the coronavirus pandemic and stimulate the economy. Because the Senate made some changes to the House-crafted bill, titled the American Rescue Plan Act of 2021 (“American Rescue Plan”), the House will have to revote on the revised bill before sending it to Biden’s desk for his signature. We expect that will happen next week.

    One provision in the American Rescue Plan would, for one year, expand the child tax credit and make it fully refundable.

    Presently, the child tax credit is worth $2,000 per kid under the age of 17 whom you claim as a dependent and who has a Social Security number. To qualify, the child must be related to you and generally live with you for at least six months during the year. The credit begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return, or over $200,000 on a single or head-of-household return. Up to $1,400 of the child credit is refundable for some lower-income individuals with children, but these people must also have earned income of at least $2,500 to get a refund.

    The American Rescue Plan would temporarily expand the child tax credit for 2021. First, the plan would allow 17-year-old children to qualify. Second, it would increase the credit to $3,000 per child ($3,600 per child under age 6) for many families. Third, it would remove the $2,500 earnings floor. Fourth, it would make the credit fully refundable. And fifth, it would allow half of the credit to be paid in advance by having the IRS send periodic payments to families from July 2021 to December 2021.

    Phase-Out for Wealthier Parents

    Not all families with children would get the higher child credit.

    The enhanced tax break would begin to phase out at AGIs of $75,000 on single returns, $112,500 on head-of-household returns and $150,000 on joint returns.

    Under the proposal, the IRS would look to the 2020 return to determine eligibility for the credit. If a 2020 return has not yet been filed, the IRS would look to 2019 returns. Families who aren’t eligible for the higher child credit would claim the regular credit of $2,000 per child, less the amount of any monthly payments they got, provided their AGI is below the current thresholds of $400,000 on joint returns and $200,000 on other returns.

    Periodic Payments in 2021

    Regarding the advance payments, the plan calls for the IRS to send out a check (mainly in the form of direct deposits) periodically from July through December to families. These periodic payments would account for half of the family’s 2021 child tax credit. For example, if monthly payments were made, this would result in payments of up to $250 per child ($300 per child under age 6) for six months and would be a nice windfall for many families. Take a family of five with three children ages 12, 7 and 5. Assuming the family qualifies for the higher child credit and doesn’t opt out of the advance payments, they could get $800 per month from the IRS from July through December, for a total of $4,800. They would then claim the additional $4,800 in child tax credits when they file their 2021 return next year.

    (Use our 2021 Child Tax Credit Calculator to see how much you would get per month under the current plan.)

    Democratic lawmakers want the IRS to start making the payments to eligible Americans in July, giving the agency just a few months’ lead time to set up its computer systems to handle such a massive, but temporary, new payment program.

    The American Rescue Plan also calls for the IRS to develop an online portal so that individuals could update their income, marital status and the number of qualifying children. People who want to opt out of the advance payments and instead take the full child credit on their 2021 return could do so through the portal.

    Some Overpayments Would Not Have to Be Paid Back

    With advanced payments of the child tax credit, there will sure to be instances in which families receive more in advanced child tax credit payments from the IRS than they are otherwise entitled to. And the American Rescue Plan contemplates this by providing a safe harbor for lower- and moderate-income taxpayers.

    Families with 2021 adjusted gross income below $40,000 on a single return, $50,000 on a head-of-household return and $60,000 on a joint return would not have to repay any credit overpayments that they get. On the other hand, families with 2021 adjusted gross incomes of at least $80,000 on a single return, $100,000 on a head-of-household return and $120,000 on a joint return would need to repay the entire amount of any overpayment when they file their 2021 tax return next year. And families with 2021 adjusted gross incomes between these thresholds would need to repay a portion of the overpayment.

    Is the IRS Up for the Challenge?

    Many tax experts and some lawmakers question whether the IRS, with its out-of-date computer systems, shrunken work force and its myriad of other duties, would be fully able to deliver periodic child credit payments, especially if the expanded child tax credit and advance payments are eventually made permanent, which could very well happen. Some Senate and House Democrats are already talking about making this permanent, touting the potential impact that a fully refundable, expanded child tax credit would have on reducing child poverty.

    Setting up a new program to deliver regular payments to taxpayers who must meet complex eligibility requirements to qualify for the child credit will be a challenge for an agency that is not used to sending out periodic payments.

    The IRS would need more funding for such a big undertaking. The House bill authorizes an additional $400 million for the IRS to take on the additional work, but some experts question whether this is enough. The IRS says that to facilitate advanced payments of the credit, it would have to build a system to compute and recompute payments as taxpayers provide new information. Such a system must also be able to issue and track payments, as well as to reconcile all payments sent out to each taxpayer during the year with the taxpayer’s credit taken on the tax return. The agency would also need to develop a program that would flag returns that don’t accurately include all advance payments received during the year.

    Another issue that the IRS will have to deal with is how to minimize the potential for fraud when it comes to refundable child tax credits. For example, the IRS estimates that in 2019 it improperly paid $7.2 billion in such refundable credits.

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    To see original article please visit: https://finance.yahoo.com/news/senate-passes-3-000-child-173400185.html

    The post Senate Passes $3,000 Child Tax Credit for 2021 appeared first on Basic Income Today.

    This post was originally published on Basic Income Today.