Dear Speaker Pelosi, Minority Leader McCarthy, Leader Schumer, and Minority Leader McConnell:
We, the xxx undersigned organizations, call on you to take action to enhance the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), and prioritize tax credits supporting our children, youth, and families over tax breaks for large corporations as you lead negotiations on tax policy provisions during the closing weeks of the 117th Congress.
It is hard to overstate the impact of the CTC and EITC improvements — they were transformational to the lives of tens of millions of children, providing resources to help them build a sturdy foundation to learn, grow, and thrive. Improvements to the CTC alone were largely responsible for nearly cutting our national child poverty rate in half in 2021, lifting 3 million children — including 1 million children under 6 — above the poverty line. The enhanced monthly tax credits helped households with children catch up on rent and translated to more food on the table for children and warm clothes in the winter. It meant more money for educational resources, music or soccer lessons, or a trip to the zoo.
It also meant more money for child care, gas, and car repairs that helped parents get to work. Parents and caregivers reported that it gave them some breathing room, providing some relief from the constant fear and distraction of how to make ends meet and affording them more time and energy to spend with their children.
With the expiration of these unprecedented tax investments, every aspect of children’s lives is harmed: roughly 4 million children were plunged back into poverty in January 2022 and food insufficiency rates among households with children increased 25%. We must do better by our children.
Tax Credit Investments Were Transformational for Millions of Children
Extensive research shows that tax credits and cash transfers foster the development of positive parent-child interactions, improve child development outcomes, and have a bigger impact than any other policy in reducing child poverty.
The CTC is a powerful tool contributing significantly to the largest decrease in the child poverty rate on record – declining from 9.7% in 2020 to 5.2% in 2021-- dramatically reducing food insufficiency, and decreasing material hardship for tens of millions of households. Families receiving the monthly CTC payments overwhelming spent the cash benefit on basic necessities including food, utilities, housing, education resources, diapers, and paying down debt. Furthermore, several studies show there is no difference in the change in employment for households receiving the CTC and those who did not. In fact, the Child Tax Credit helped families, especially single mothers, increase their labor force participation by allowing them to afford child care, transportation, and other necessities that help them get to work. Similarly, the EITC helped young people pay for transportation to and from job training, school or community-based support.
Furthermore, research out of the University of Washington suggests that the collective impact of tax credits for families lead to a reduction in child maltreatment reports by helping to stabilize families. In light of this data, this University of Washington study suggests that child neglect reports decrease when parents have more economic resources. Decreasing these reports is an important outcome that could generate multiple other positive outcomes for children and their families.
Tax Credit Investments Make Smart Economic Sense for Families and Our Society
Analysts from Poverty Solutions at the University of Michigan found that federal pandemic assistance helped close the persistent gap in material hardship for U.S. families with children and that the advances remained even in the face of rising inflation. Over 130 economists called for the reinstatement of the Child Tax Credit payments as one of the most efficient and direct approaches to help offset inflationary pressures and concurred that the CTC would not increase inflation.
Enhancing the CTC also makes good economic sense for our greater society as child poverty is estimated by the National Academy of Sciences to cost the U.S. nearly $1 trillion annually, and researchers from Columbia University find that investment in a child allowance program will pay massive dividends – estimating an 8:1 return on investment. It also strengthens local economies — the Niskanen Center found that extending the Child Tax Credit for even just a year would support the equivalent of 500,000 private-sector jobs. Finally, it lowers our child poverty rate to closer of that of other wealthy countries, increasing our competitiveness around the world.
Enhanced CTC and EITC Reaches Many of the Kids and Families with the Biggest Barriers to Economic Security
The American Rescue Plan Act (ARPA) enhancements to the CTC and EITC benefitted many children, youth, and families most in need. The CTC improvements increased the benefit to as much as $3,600 a year per young child and $3,000 a year for children six and older (including 17-year-olds), provided advanced monthly payments of the CTC starting in July 2021, and made the credit fully refundable. The EITC expansion nearly tripled the amount of the credit for low-income workers and broadened the eligibility age from 25 to 18 for foster youth and youth experiencing homelessness. The enhanced CTC likely reached nearly 40 million households with over 65 million children, and the EITC improvements have the potential to benefit over 17 million workers, including an estimated 380,000 to 500,000 former foster youth. By making the full CTC available for the first time to families with little or no income, it reached the one-third of our children who had been left behind, disproportionately benefiting households of color. Recent analysis from Columbia’s Center on Poverty and Social Policy finds that children who were disproportionately ineligible for the CTC prior to the ARPA enhancements -- Black and Hispanic children, children in single-parent families, rural families, children in larger families, and families with young children— all experienced large declines in child poverty in 2021.
Unfortunately, while great progress was made, additional steps could have been taken to create a more equitable tax code to benefit all children. For example, even though the poverty gap for Black and Hispanic children compared to white children narrowed in 2021, a sizeable gap remains. Children in immigrant families continue to experience higher rates of poverty than their nonimmigrant peers because they oftentimes remain ineligible for assistance – an estimated one million immigrant children with Individual Taxpayer Identification Numbers (ITINs) remain excluded from receiving the Child Tax Credit, unfairly denying them critical support. Families in Puerto Rico did not have access to the advanced monthly payments, and under current law families with children in Puerto Rico accrue the refundable portion of the Child Tax Credit at a slower rate than families in the states.
Congress Must Prioritize Children
The expiration of the CTC and EITC improvements, combined with high food costs and rising rents, sent many families with children back to experiencing significant material hardship, increasing child hunger and suffering.
In a May 2022 poll by Lake Research, voters expressed support for extending the improved CTC by a wide 72-21% margin. American voters also expressed overwhelming concern (86% concerned to 12% not concerned) with data indicating that “child poverty costs our society up to $1.1 trillion a year due to higher crime, poor health outcomes, and lower income levels with children living in poverty grow up.”
We strongly urge you to enhance the CTC and EITC in any end-of-the-year tax policy decisions and prioritize children and youth in households who face the biggest barriers to economic security, for every child deserves the resources they need to thrive.
Congress faces a pivotal moment of opportunity to address the best interests of our nation’s children. We urge you to act without delay.
Sincerely,
The Undersigned Organizations