Harnessing The Child Tax Credit As A Tool To Invest In The Next Generation
It’s no secret that middle-class Americans are being squeezed. The price tag on middle-class economic security has grown significantly in recent years thanks to a dramatic increase in costs associated with a middle-class lifestyle such as housing, health care, college savings, and retirement savings. The combination of rising costs and stagnant wages has left millions of American families strained. American families with kids are the most likely to be struggling—child related costs account for nearly 70 percent of the rising costs associated with being in the middle class. Moreover, the costs of child poverty are staggering, costing the U.S. economy $672 billion a year, or nearly 4 percent of GDP in lower educational outcomes, higher health costs, and increased spending on criminal justice.
But a new report from the Center for American Progress outlines how policy makers can help relieve the middle-class squeeze by strengthening Child Tax Credit program (CTC). The current CTC has several limitations that affect the families who need it most. For example, the credit is not fully refundable, preventing it from reaching the lowest-income children, and its minimum earnings requirement excludes many families who experience job loss. Our colleagues at CAP have suggested a few key proposals to strengthen this important credit:
- Making permanent the improvements to the CTC and Earned Income Tax Credit slated to expire at the end of 2017, as failure to do so would push nearly 8 million children into or more deeply into poverty.
- Eliminating the minimum earnings requirements and making the credit fully refundable to ensure it reaches all low- and moderate-income families with children.
- Indexing the value of the credit to inflation so that it does not continue to lose value over time even as the costs of reaching or staying in the middle class are rising.
- Enhancing the CTC with a supplemental Young Child Tax Credit of $125 a month for children under the age of 3. The Young Child Tax Credit would be made available to families on a monthly basis with the understanding that many child-related costs cannot wait until tax season.
These changes would not only help parents afford necessities associated with raising young children like buying diapers, car seats, and cribs, but they would also help parents meet the rising costs of middle-class economic security.
The birth of a child is one of the leading triggers of poverty in the United States, so families with young children are particularly at risk. Furthermore, the effect of poverty on young children is hugely detrimental: ongoing economic instability hurts children’s long-term health, educational, and employment outcomes. But enhancing the CTC would go a long way in alleviating child poverty. Along with the report, CAP also released an interactive map that shows just how much the depth of child poverty would be reduced in each state with the proposed reforms to the Child Tax Credit. Check it out!
BOTTOM LINE: Americans are being squeezed by the rising price tag of middle-class economic security, and families with children are the most likely to be struggling. The United States has shockingly high levels of child poverty, but making a few basic changes to strengthen the Child Tax Credit would help families better invest in the next generation and lessen the depth of child poverty.
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