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‘A grand experiment’: With first monthly payments to parents set to arrive Thursday, Democrats push to make them permanent

UPDATED: Tue., July 13, 2021

 (Molly Quinn / The Spokesman-Review)
(Molly Quinn / The Spokesman-Review)
By Ted McDermott and Orion Donovan-Smith The Spokesman-Review

WASHINGTON – Starting Thursday, families across the United States will receive the first in a series of monthly payments of up to $300 per child that could dramatically cut child poverty and offer a preview of what might become a major part of the American social safety net for years to come – if Democrats get their way.

In March, as part of the $1.9 trillion pandemic relief and economic stimulus bill Congress passed with only Democratic votes, lawmakers transformed the existing Child Tax Credit into the kind of monthly allowance countries like Canada, South Korea and most of Western Europe already provide to help their citizens cover the cost of raising kids. But with the new benefits set to expire at the end of the year, President Joe Biden and his congressional allies are pushing to make the change permanent.

The White House estimates 1.4 million kids in Washington and 410,000 in Idaho qualify for the monthly benefits of $300 for each child under age 6 and $250 for those 6 to 17. Six payments will be sent from July to December, and taxpayers can claim the other half of the credit – up to $3,600 – when filing taxes next year.

Data from the U.S. Census Bureau indicates there were 115,016 kids under the age of 18 in Spokane County as of 2019, plus 37,448 in Kootenai County. While some families may not receive a full tax credit due to their income, a rough estimate suggests more than $500 million could flow into the two counties as a result of it.

But it’s difficult to accurately predict the tax credit’s possible economic impact in the Inland Northwest, local economists say.

Grant Forsyth, Avista Corp.’s chief economist, likened the money to “another round of fiscal stimulus.”

During previous pandemic-relief payments to citizens, Forsyth said, most people covered their rent, bought food and paid down debt and bills. A central question as families receive the new tax credit, he said, is whether they will be able to use the money on child care, even if they want to. The payments come with no strings attached.

The child care system was strained before the pandemic, and the situation only worsened as COVID-19 spread.

“There’s really a shortage of child care options available,” Forsyth said.

“So even with some additional monies that could be used toward child care, what we have is a supply problem still. And there’s no quick remedies for that. So my guess is, even with these additional dollars, it’s still going to be a bit of struggle for people to find child care.”

Patrick Jones, executive director of Eastern Washington University’s Institute for Public Policy and Economic Analysis, agrees that the supply of child care may not immediately meet demand. But he said the influx of money to parents could help improve the balance.

“If there is a lot more money coming in the direction of child care establishments,” Jones said, “that would increase their supply, their capacity through whatever means, whether it’s hiring more people and paying the same wages or hiring more people and paying a little more wages to try to get more people to work in child care settings.”

He said that if people are able to find child care, the tax credit’s economic impact could begin to multiply, as parents are freed up to re-enter the workforce and increase their incomes.

But Jones and Forsyth agree it’s too early to tell how the credit’s effects will unfold.

“There are so many unknowns here,” Jones said. “We don’t know the number of young working parents who are on the sidelines because of the inability to pay for child care. So this is kind of a grand experiment.”

On top of increasing the total value of the credit from the previous yearly maximum of $2,000 per child, the change makes the benefit fully refundable, meaning all but the most affluent families can receive it. In its prior form, low-income families that owed less than $2,000 in federal income tax couldn’t claim the full amount.

There’s still a risk the benefits may not reach the kids who need it most, because the lowest-earning families are not required to file federal tax returns. Those “non-filers” can still receive the credit, but need to use a new online portal to make sure the Internal Revenue Service has their information.

Families that filed tax returns for either 2019 or 2020 will automatically get the payments in the same way they received their most recent tax refunds and the economic stimulus payments Congress included in pandemic relief bills, either by direct deposit or a check in the mail.

The IRS and the Treasury Department, which are together responsible for administering the new credits, estimate the benefits will reach 88% of children in the country. Families earning up to $150,000 – or $112,500 for single-parent households – qualify for the full credit, with payments gradually phased out for higher-income families.

The United States has a higher child poverty rate than any other developed country, according to data from the Organization for Economic Cooperation and Development, a group of 38 developed nations. Making the revamped Child Tax Credit permanent could cut child poverty by 40% in Washington and 42% in Idaho, according to White House estimates.

Democrats used a procedural tool called budget reconciliation to pass the March relief bill with just 50 votes in the Senate, bypassing the 60-vote majority required to get most legislation through the upper chamber. Now, hopes for making the monthly child benefits permanent rest with a second reconciliation package.

Republicans used the same process to pass the 2017 tax cut bill that doubled the annual Child Tax Credit from $1,000 to $2,000 per child, but no GOP lawmaker is expected to support the new reconciliation package.

Even with only Democratic votes needed to pass such a bill, a provision to make monthly child benefits part of the U.S. social safety net will need the support of the full Democratic Caucus in the Senate and nearly all the party’s members in the House.

Orion Donovan-Smith's reporting for The Spokesman-Review is funded in part by Report for America and by members of the Spokane community. This story can be republished by other organizations for free under a Creative Commons license. For more information on this, please contact our newspaper’s managing editor.

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