JOHN RABY, FATIMA HUSSEIN and JOSH BOAK / Associated Press
For the first time in six months, families Friday are waiving a monthly payment from the child tax credit — a program that was meant to be part of President Joe Biden’s legacy but has instead emerged as a focal point for who is worthy of state support.
Retiree Andy Roberts of St. Albans, West Virginia, relied on the checks to raise his two young grandchildren, whom he and his wife adopted because the birth parents were recovering from drug addiction.
The Roberts are now on $550 a month. That money helped pay for Girl Scouts, ballet and drama classes, and children’s shoes, which Roberts says are more expensive than adult shoes. The tax credit, he said, is a “godsend.”
“It will make you tighten your belt when you have something to tighten,” Roberts said of losing the payments.
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 Senator Joe Manchin of Roberts’ home state of West Virginia declined to extend the loan out of concerns that the money would keep people from working and that additional federal spending would fuel inflation, which has already risen to nearly 40%. year high.
According to IRS data, 305,000 children in West Virginia benefited from the expanded credit last month.
Manchin’s opposition in the evenly divided Senate derailed Biden’s welfare spending package, causing expanded tax credits, which expired mid-month, to expire in January. This eats away at family income at the very moment when people are struggling with higher prices.
However, families only received half of their 2021 loan on a monthly basis, and the other half will be received once they file their taxes in the coming months. The size of the loan will be cut in 2022, with full payments only going to families who have earned enough income to owe taxes, a policy decision that will limit benefits for the poorest households. And the credits for 2022 don’t come until people file their taxes early the following year.
West Virginia families surveyed by The Associated Press highlighted how their grocery and gas bills have risen and said they are making do with a smaller financial cushion than they were a few months ago.
“You have to learn to adapt,” said Roberts, who worked as a car dealer for five decades. “You never really dreamed that everything would suddenly explode. You go down and get a pack of hamburgers and it’s $7-8 a pound.”
According to the Biden administration’s calculations, the expanded child tax credit and its monthly payments were a political success that paid out $93 billion over six months. More than 36 million families received the payments in December. Payments were $300 per month for each child under the age of five and $250 per month for children between the ages of six and 17.
The Treasury Department declined to answer questions about the expiry of the expanded child tax credit, which has become a politically sensitive issue amid Biden’s nearly $2 trillion economic package stalled in the Senate.
Manchin has backed some sort of work requirement for people receiving the payment, amid concerns that automatic state aid could cause people to quit their jobs. But his main objection in a written statement last month sidestepped that issue when he raised concerns about inflation and that a one-year extension masked the true cost of a tax credit that could become permanent.
“My Democratic colleagues in Washington are determined to transform our society so dramatically that our country will become even more vulnerable to the threats we face,” Manchin said. He added he was concerned about inflation and the level of government debt.
The Census Bureau examined recipient spending patterns in September and October. Almost a third used the loan to finance school costs, around 25% of families with small children used it for childcare. About 40% of recipients said they rely primarily on the money to pay off debt.
There are separate benefits related to improving the living conditions of impoverished children whose families previously could not claim the full tax credit due to insufficient income. An analysis by the Urban Institute estimated that extending credit as developed by the Biden administration would reduce child poverty by 40%.
The tax credits did not result in an immediate brain drain, as some lawmakers had feared. The Bureau of Labor Statistics reported that the percentage of people with jobs rose from 58% in the month before monthly payments began to 59.5% last month. The same trend occurred in West Virginia, where the employment ratio rose to pre-pandemic levels of 52.9%.
There is academic debate as to whether credit could suppress employment over the long term, with most studies suggesting the impact would be statistically negligible.
Academics studying the tax credit are torn over how a permanent program would impact the economy and child welfare.
Katherine Michelmore, associate professor of public policy at the University of Michigan, and two other researchers estimated that about 350,000 parents would retire, a number that isn’t all that significant in an economy with about 150 million jobs.
Michelmore said the long-term effects of a permanent tax credit would be positive for the economy because children raised in higher-income families “tend to do better in school and are more likely to graduate from high school. It may be another 15 years, but there will be further cost savings in the future.”
One of the key questions for politicians is whether bureaucracies or parents are better off spending money on children. Manchin has proposed a 10-year, funded version of Biden’s economic proposal that would abandon the focus on child tax credits and instead fund programs like universal pre-kindergarten to avoid sending money directly to families.
“It’s a moral question whether you trust the families to make their own decisions,” Michelmore said.
Hairstylist Chelsea Woody is a single mom from Charleston, West Virginia who works six days a week to make ends meet. The extended child tax credit payments had helped fund her son’s daycare, and she had them splurge on clothes for him.
“It really helps a lot. It’s an extra pillow instead of worrying about how to pay a bill or if anything turns up,” Woody said as she loaded groceries into her car. “It’s helpful for a lot of people. It helps working families because we struggle the most. I’m hardly at home with my child because I work all the time.”
Hussein reported from Washington and Boak from Baltimore.
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