Now we know what a big deal Biden's monthly child tax credit is for 61 million kids: It's helping them get childcare and school supplies

October 31, 2021

Now we know what a big deal Biden's monthly child tax credit is for 61 million kids: It's helping them get childcare and school supplies

teacher and three girls are sitting around a table and playing with toys at a preschool — skynesher/Getty Images

In July, families started receiving advance child tax credit payments as monthly direct deposits or checks.
A new analysis shows lower-income families are using the payments to cover basic expenses.
Biden's $1.75 trillion social spending framework expands the child tax credit for only one more year.

When the Biden administration started sending monthly child tax credit checks to millions of families in July, America's poorest parents used that extra cash to cover basic expenses like school supplies and rent.

Two new analyses show families needed that $3,600 per child age 5 and under, or $3,000 per kid between 6 and 17.

One analysis, from the Census Bureau, showed the checks helped families cover basic expenses, lifting children out of poverty, and putting food on the table

But in Washington, Biden's new social spending plan unveiled on Thursday includes extending the expanded child tax credit for just one year, instead of through 2025 as originally planned. It also cuts the number of families eligible for the advance payments.

The slimmed-down package of $1.75 trillion comes after resistance over the larger price tag from centrists like Sens. Joe Manchin and Kyrsten Sinema. In the face of intraparty negotiations earlier this month, child tax credits were one of the first items on the chopping block.

Despite Census data showing the effects of the benefit, Democrats are at risk of not getting credit for the program. A recent Morning Consult Poll earlier this month found that only 47% of voters credited Democrats for setting up the program. Only 35% of voters said it should be made permanent.

Here's how big a difference it has made so far in 2021.

Poorer families were able to cover 'bare necessities' for their kids

The first month of checks alone helped lift 3 million children out of poverty and helped feed two million, as Insider reported from previous Census data.

Another new analysis, from the Center on Budget and Policy Priorities' Claire Zippel, specifically focused on households with incomes of less than $35,000. She noted that across the nation, "large majorities of families with low incomes put their Child Tax Credit payments toward the most basic necessities, education, or both."

Zippel's analysis shows that 97% of DC households in the bracket who got payments in the previous four weeks used it on basic needs and/or school-related costs. Zippel found 59% of those respondents used the payments on food. Forty percent of households with incomes below this amount spent the advance child tax credit payments on school expenses, like supplies and after-school programs.

The money has been especially helpful for back-to-school season, as many kids returned to in-person learning. Nearly a third of households surveyed by the Census Bureau in late September used the child tax credit on school-related expenses.

And, as parents returned to work, 11% of those surveyed said they used it on childcare. For parents with the youngest kids under age 5, just over a quarter spent the advance payments on childcare.

As Insider has reported, the childcare industry is suffering from the labor shortage as workers seek better pay and conditions. This drives costs for parents up even more. The average annual cost for center-based care for infants to 4 year olds is around $10,000, per a report from Child Care Aware of America.

But it looks like Democrats are rolling back investments in the credit

Although the expanded child tax credit has been helpful for families it was one of the first social safety net measures to be trimmed in Biden's Build Back Better plan.

Manchin's opposition to the price tag led to debates about limiting the number of households that receive the credit by placing an income cap and a work requirement on eligibility. Biden's plan on Thursday reflected just that. Only singles earning below $75,000 and couples making under $150,000 can get monthly checks. Households above those thresholds will still get the credit as a lump sum during tax season.

Zippel wrote that sending checks to families with the lowest incomes is crucial to keeping the majority of children out of poverty: "Congress should make it a top priority to ensure that the full credit remains permanently available to children in families with the lowest incomes, a measure that in percentage terms drives 87 percent of the expansion's anti-poverty impact."

Read the original article on Business Insider