2021 Bread for the World Offering of Letters
Expanding the Child Tax Credit
Expanding the Child Tax Credit
“For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future.” Jeremiah 29:11
One component of our Offering of Letters is aimed at making permanent the one-year expansion of the Child Tax Credit included in the American Rescue Plan. This expansion has the potential to nearly halve the number of US children living below the poverty line, thus dramatically reducing childhood hunger.
What is the Child Tax Credit (CTC)? The CTC is a federal income-tax credit that helps families pay the cost of raising children. The CTC in effect in 2020 was limited to $2,000/child through age 16 and structured such that wealthy families benefited but the neediest families were left out.
What is better about the expanded CTC? The CTC in effect for 2021 provides $3,600 for each child through age 5, then $3,000 for children through age 17. Children in Puerto Rico and US territories, formerly ineligible for the credit, now qualify. Also, the credit is now fully refundable, making it available to all low- and middle-income families who file a tax return. Another key improvement is that the credit will be paid to families monthly rather than annually when they file their taxes.
Why do families need this extra income? Across all demographics, parents are increasingly dependent on low-wage jobs or the gig economy. Year 2019 data from the United Way shows that about a third of Michigan households with children were struggling financially. The pandemic has only made things worse. Poverty leads to hunger and other stresses, which can have severe life-long consequences for children.
Can we afford this expanded program? The projected annual cost of the expanded CTC, $120 billion, is an investment that will yield generous rewards. Experience from small-scale family-support programs in the U.S. and programs in other nations shows that the breathing room provided by support payments often helps parents increase their earned income. Thus, directly and indirectly, the expanded CTC is expected to substantiallyreduce childhood hunger and other forms of deprivation. These reductions will in turn lead to better health and educational outcomes, greater productivity, lower rates of incarceration, lower rates of homelessness, and so on. Bread for the World estimates that childhood hunger costs our economy $800 - $1,100 billion annually. By making the expanded CTC permanent, we will join the many other wealthy nations that are already reaping the benefits of direct payments to families with children.
What is the Child Tax Credit (CTC)? The CTC is a federal income-tax credit that helps families pay the cost of raising children. The CTC in effect in 2020 was limited to $2,000/child through age 16 and structured such that wealthy families benefited but the neediest families were left out.
What is better about the expanded CTC? The CTC in effect for 2021 provides $3,600 for each child through age 5, then $3,000 for children through age 17. Children in Puerto Rico and US territories, formerly ineligible for the credit, now qualify. Also, the credit is now fully refundable, making it available to all low- and middle-income families who file a tax return. Another key improvement is that the credit will be paid to families monthly rather than annually when they file their taxes.
Why do families need this extra income? Across all demographics, parents are increasingly dependent on low-wage jobs or the gig economy. Year 2019 data from the United Way shows that about a third of Michigan households with children were struggling financially. The pandemic has only made things worse. Poverty leads to hunger and other stresses, which can have severe life-long consequences for children.
Can we afford this expanded program? The projected annual cost of the expanded CTC, $120 billion, is an investment that will yield generous rewards. Experience from small-scale family-support programs in the U.S. and programs in other nations shows that the breathing room provided by support payments often helps parents increase their earned income. Thus, directly and indirectly, the expanded CTC is expected to substantiallyreduce childhood hunger and other forms of deprivation. These reductions will in turn lead to better health and educational outcomes, greater productivity, lower rates of incarceration, lower rates of homelessness, and so on. Bread for the World estimates that childhood hunger costs our economy $800 - $1,100 billion annually. By making the expanded CTC permanent, we will join the many other wealthy nations that are already reaping the benefits of direct payments to families with children.
