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Families Without Monthly Deposit When Child Tax Credit Program Expires

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Families Without Monthly Deposit When Child Tax Credit Program Expires

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CHARLESTON, W.Va. – For the first time in six months, families are forgoing a monthly installment of the Child Tax Credit on Friday – a program that was meant to be part of President Joe Biden’s legacy, but has instead emerged as a point flash on who is worthy of government support.

Retiree Andy Roberts, of St. Albans, West Virginia, relied on the checks to help raise his two young grandchildren, whom he and his wife adopted because the birth parents are recovering from drug addiction.

The Roberts are now at $ 550 a month. That money helped pay for Girl Scouts, ballet and theater lessons, and children’s shoes, which Roberts says are more expensive than adult shoes. The tax credit, he said, was a “godsend”.

“It will force you to tighten your belt, if you have anything to tighten,” Roberts said of the loss of 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, from the home state of Roberts in West Virginia, opposed the extension of credit, fearing that the money would discourage people from working and that any additional federal spending would ‘fueling inflation which has already climbed to almost 40. year high.

According to IRS data, 305,000 West Virginia children benefited from extended credit last month.

Manchin’s opposition in the equally divided Senate derailed Biden’s social spending program and in January expired the expanded tax credits that came out in the middle of every month. It reduces the income of families at the precise moment when people are grappling with higher prices.

2021 child tax credit: US parents may owe money after monthly payments end

However, families have only received half of their 2021 credit on a monthly basis and the other half will be after they file their taxes in the next few months. The amount of credit will be reduced in 2022, with full payments only made to families who have earned enough income to owe taxes, a policy choice that will limit benefits for poorer households. And the credits for 2022 will only come after people file their taxes early in the next year.

Families in West Virginia interviewed by The Associated Press highlighted the increase in their grocery and gas bills and said they would need to get by with less financial cushion than there is. some months.

“You’re going to have to learn to adapt,” said Roberts, who worked as a car dealership for five decades. “You never really dreamed that everything would blow up all of a sudden. You go downstairs and get a pack of burgers and it’s $7-8 a pound.”

According to the Biden administration’s calculations, the expanded child tax credit and its monthly payments have been 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 five and under, and $ 250 per month for children six to 17.

The Treasury Department declined to answer questions about the expiration of the expanded child tax credit, which has become a politically sensitive issue as part of Biden’s nearly $ 2 trillion economic program that is in focus. died in the Senate.

Manchin supported some form of work requirement for those receiving the payment, fearing that automatic government assistance could cause people to quit their jobs. Yet his main objection, in a written statement last month, sidestepped that question as he voiced concerns about inflation and that a one-year extension was masking the real costs of a tax credit that could become permanent.

“My fellow Democrats in Washington are determined to radically reshape our society in a way that makes our country even more vulnerable to the threats we face,” Manchin said. He added that he was worried about inflation and the size of the national debt.

The Census Bureau surveyed the spending habits of recipients in September and October. Almost a third used the credit to pay for school expenses, while about 25% of families with young children spent it on child care. About 40% of recipients said they mostly rely on money to pay off their debts.

There are distinct benefits in terms of improved outcomes for impoverished children, whose families previously could not access the full tax credit because their incomes were too low. An Urban Institute analysis estimated that extending credit as developed by the Biden administration would reduce child poverty by 40%.

The tax credits did not cause an immediate exodus of the workforce, as some lawmakers feared. The Bureau of Labor Statistics reported that the percentage of people with a job fell from 58% the month before monthly payments started to 59.5% last month. The same trend occurred in West Virginia, where the employment-to-population ratio reached the pre-pandemic level of 52.9%.

There is academic debate on whether credit could kill employment in the long run, with most studies suggesting the impact would be statistically negligible.

Academics studying the tax credit are torn over how a permanent program would affect the economy and child welfare.

Katherine Michelmore, associate professor of public policy at the University of Michigan, and two other researchers estimated that around 350,000 parents would leave the workforce, a figure that is not that big in an economy of around 150 million. jobs.

Michelmore said the long-term effects of a permanent tax credit would have a positive impact on the economy, as children who grow up in higher-income families “tend to do better in school, they are more likely to graduate from high school. It may take 50 years, but there will be more savings in the future.”

One of the key questions for policy makers is whether bureaucracies or parents are best at spending money on children. Manchin proposed a 10-year funded version of Biden’s economic proposal that would remove the focus on child tax credits and instead fund programs like Universal Preschool, to avoid sending money directly. to families.

“It’s a moral question whether you trust 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 pay for her son’s day care and allowed him to splurge on clothes for him.

“It really helps a lot. It’s an extra cushion, instead of worrying about how I’m going to pay a bill or if something happens,” Woody said as he loaded groceries into his car. “It helps a lot of people. It helps working families because we struggle the most. I’m rarely home with my child because I work all the time.”

Copyright © 2022 by The Associated Press. All rights reserved.



Families Without Monthly Deposit When Child Tax Credit Program Expires

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