Maine families were given a lifeline this year and it is going to disappear unless Congress acts fast.
The child tax credit has been part of the tax code since 1997 and reduces tax liability for families with dependents. Under the American Rescue Plan Act, which became law in March, the credit increased from $2,000 to $3,000 per child, with an additional $600 for children younger than age 6.
The credit covers almost 90 percent of families and close to 200,000 Maine children under the age of 18. It is available to families with incomes of up to $150,000 for couples and $112,000 for single parents.
Under the plan, the U.S. Treasury was authorized to issue advance payments of one-half the credit to families on a monthly basis from July to December of this year rather than a lump sum next year at tax time. The last payment was issued Dec. 15. A provision in President Biden’s Build Back Better plan would have extended the expanded credit into the new year, but the bill has yet to be passed.
The Child Tax Credit has been a sticking point for Democratic Sen. Joe Manchin of West Virginia, whose vote in a divided Congress is necessary for passage. Manchin told the White House last week that he could not support the bill even though voters in his state are urging him to do so.
Maine’s congressional delegation is divided on the Build Back Better plan, but all seem to support the expanded tax credit. Last week, Sen. Susan Collins said she was open to overhauling the child tax credit program, separate from BBB, to continue payments to families. The plan, which has been floated by Sen. Mitt Romney, would change existing law and permanently codify the tax cut.
A recent study from Columbia University found that making the payments permanent could reduce child poverty in the U.S. by 40 percent. After the first credits went out in July, food insecurity in households with kids dropped from 11 to 8.4 percent, the Census bureau found. The same study also shows that families are using the credit to pay for child care, which allows caregivers the opportunity to reenter the workforce – something that is vital for the country’s continued economic rebound.
The tax credit is working. It is lifting the most vulnerable families out of poverty and providing a cushion to help weather future storms. In short, the credit is helping families at a time when the wealthy and big corporations are recording record profits.
Members of Congress should take a hard look at the growing body of data, but they should also get out in their districts and talk to families who are benefiting from the credit. We also urge families benefiting from the credit to write to their elected officials and share their stories.
Visit www.cbpp.org/families-with-low-incomes-spend-expanded-child-tax-credit-on-most-basic-needs-education-0 to see how households with incomes below $35,000 spent their credit payments.
Source: U.S. Census Bureau Household Pulse Survey