Lupe Mendoza was like many working parents during the COVID-19 pandemic: seeking stability as the separation of work, home and family life blurred quickly in light of immediate stay-home orders last April.
In the Walla Walla Public School District, three of her five sons – Alexis, Ismael and Sebastian Alvarez, ages 12, 10, 8 – went through the sudden changes of moving to at-home learning. Alexis attends Garrison Middle School. Ismael and Sebastian are students at Sharpstein Elementary.
Working as a family support specialist, Mendoza’s internet bandwidth couldn’t sustain both her online Zoom meetings with 42 families and her sons’ learning programs. As their appetites grew, the children did too. Her $400 grocery bill tripled.
“They grew wider and taller and outgrew a lot of their clothes,” Mendoza said. “I had to begin asking, ‘Do I pay this bill or do we have food?’ We were running through $200 worth of groceries in three days.”
She also found herself becoming a tutor for her children, helping them chew through tough jargon and bland terminology in their new online curriculums.
“The language? Dry and difficult,” Mendoza said of Sebastian’s homework. “I found them difficult for myself, and it would take us twice as long with just the way the words were arranged.”
Mendoza, 40, was mentally and financially overwhelmed. But last week, help arrived in the form of a $750 payment from the Treasury Department.
The money was the first of six monthly payments most families with children will receive between July and December, the result of a provision in the pandemic relief bill Democrats in Congress passed in March that transformed the existing child tax credit into what is effectively a child allowance.
“It’s not a win or loss,” Mendoza said. “I’m blessed that we’re able to get it.”
Mendoza saw the potential of the child tax credit’s impact during the first and second round of stimulus checks in 2020. The arrival of both the stimulus payments and the pandemic electronic benefit transfer helped Mendoza and families she supervised with food costs and new expenses, such as internet hotspots to connect to lessons and meetings. The upside is that the child tax credit comes with nostrings attached and no pressure to spend it on specifics. Mendoza believes different needs for different families will be met with the credit.
“The biggest thing with the families I work with, is if their basic needs aren’t being met they’re not going to function in anything else,” Mendoza said. “There’s many (needs), but I believe it’s going to help lots of families in poverty meet whatever those are. Once they’re able to do that, they’ll be able to fully function and build themselves up the ladder with their self-esteem and being productive members of society.”
A federal child tax credit has existed in some form since 1997, but until this year the benefit was not available to the poorest families and could only be collected when filing taxes at the end of the year. Elaine Maag, a researcher at the Urban-Brookings Tax Policy Center, said the credit was originally designed not to lift up the poorest Americans but as an incentive for them to pull themselves out of poverty.
Over the years, she said, a growing body of research has shown that approach to be ineffective.
“There has been a lot of poverty policy driven by this notion that one of the best ways to get out of poverty is to be working and earning income, and so we developed these policies that were designed to force parents to do that,” Maag added. “But of course the obvious problem is that children don’t choose their parents.”
While moving, the July deposit helped Mendoza rent a UHAUL truck and get the families’ larger items moved. It’s taken care of gas from the five-minute trips back and forth from her old to new place. The remaining $300 was spent on clothes for Alexis and Ismael.
Now that she’s found an affordable four-bedroom, two-bath apartment in the Walla Walla area, the stresses of moving have eased up with the $750 payment. In the midst of moving, catching up on bills and preparing the children for back to school events, money in the Mendoza household isn’t expected to loosen up until October.
“With the CTC I can breathe a little easier next month without the stress of school stuff,” Mendoza said. “I’m still stressed, but not as nearly as stressed.”
Samuel Hammond, director of poverty and welfare policy at the Niskanen Center, a D.C. think tank, said the philosophy behind the previous version of the child tax credit left the United States far behind other wealthy nations in child poverty.
“With its introduction, the child tax credit was framed around the language of tax relief, and that foreclosed moving towards a true child benefit,” Hammond said. “And it’s really made the United States an outlier in child poverty.”
About 21% of U.S. children live below the poverty line – according to data from the Organization for Economic Cooperation and Development – roughly twice the child poverty rate in Canada. The rate is even lower in countries including Hungary, the Czech Republic and most of Western Europe. Not coincidentally, Hammond said, most other developed countries provide child allowances to their citizens.
The revamped child tax credit, perhaps the biggest antipoverty effort the U.S. government has undertaken in decades, is revolutionary in its simplicity. Unlike the complicated constellation of existing federal subsidies and tax breaks Americans have had to navigate, there are no strings attached and few bureaucratic hoops to jump through.
From July through December, families earning up to $150,000 – or $112,500 for single-parent households – qualify for monthly payments of $300 for each child under age 6 and $250 for kids aged 6 to 17. The payments are gradually phased out for higher-income families, and the other half of the credit can be claimed when filing taxes next year.
The one-year trial run of the benefit came about as part of the $1.9 trillion pandemic relief package Congress passed in March with only Democratic votes after Republicans universally objected to its cost. While the relief bill gave Democrats an opening, the change was nearly two decades in the making.
Congress first created a child tax credit in 1997, a $500-per-kid benefit for middle- and upper-income families that was nonrefundable, meaning poorer families that made too little money to owe that much in federal taxes couldn’t claim the benefit.
Within a few years of its enactment, the child tax credit began to gradually grow bigger and reach more families. A 2001 bill gradually increased its annual value to up to $1,000 per child and made it partly refundable. Subsequent legislation made the benefit available to more families, and in 2017 Republicans doubled its maximum value again to $2,000 per child as part of a major tax bill, but the poorest families still didn’t qualify.
In 2003, Rep. Rosa DeLauro, a progressive Democrat from Connecticut, began what became an 18-year legislative odyssey to make the child tax credit fully refundable and available to all but the most affluent American families. DeLauro’s effort got a major boost when Rep. Suzan DelBene – a northwest Washington lawmaker who now leads the moderate New Democrat Coalition – signed on in 2017.
DelBene is a member of the Ways and Means Committee, which handles tax issues, and became part of a small group of House and Senate Democrats who made transforming the child tax credit their top legislative priority. She said COVID-19 made the need for child benefits even clearer.
“It got worse during the pandemic, and it also gave us an opportunity to move forward with a solution that we knew was a good solution,” DelBene said. “Not only to help families through the pandemic, but also an incredibly important long-term solution.”
The White House has thrown its support behind extending the expanded child tax credit, but DelBene’s goal is to make it a permanent part of the American social safety net.
“It’s hugely important that we make it permanent,” she said, “because kids don’t grow up in a year or five years and families can’t plan on something if they’re waiting for Congress to decide whether it’s going to continue or not.”
A Columbia University analysis in January projected making the expanded credit permanent would cut overall child poverty nearly in half, with an even greater impact on kids of color, decreasing poverty among Black children by 52% and Native children by 61%.
Hammond said the revamped credit will also have a bigger impact on families who live in rural areas.
“When you look at the states benefiting per capita, they’re overwhelmingly rural,” he said. “This is going to be an enormous injection of resources into local communities, and in relative terms a boon for rural economies.”
According to data from a forthcoming Niskanen Center analysis Hammond shared, Idahoans stand to gain more in child tax credit payments – equivalent to 1.8% of the Idaho’s gross domestic product – than residents of any other state. The runners-up by that metric are Mississippi, Utah and Montana, followed by several other rural states.
Washington families will collectively receive a total of nearly $4.9 billion in child tax credit payments this year, according to the Niskanen Center analysis, an increase of more than $1.9 billion from the previous version of the credit. In Idaho, families will get a total of more than $1.5 billion, up more than $597 million compared to the pre-2021 credit.
Another advantage of the revised credit, Maag said, is families aren’t required to navigate complex bureaucratic steps. The fact that families can use the money however they see fit is another plus, she said, as long as parents understand the benefits are meant to help kids.
“Benefits are effective when people understand them and can access them,” she said. “Especially in low-income families, if there’s a lot of stress in your life, piling on one more difficult thing is not going to be effective. It needs to be straightforward.”
The new credit has hit a few snags, Maag said, including in cases of divorced parents who have an arrangement to claim a child on their tax returns in alternating years. The IRS has set up a website that lets taxpayers opt out of the monthly advance payments, but the agency hasn’t yet created a way to make other changes.
Another concern is that, despite the lowest-income families now being eligible for the full credit, some of the children who most need the payments may not get them if their parents didn’t earn enough to need to file taxes in the past two years. The IRS has created a “nonfiler portal” for those parents to sign up for the payments, but the website is currently available only in English and doesn’t work on mobile browsers.
The expanded credit is set to expire at the end of the year, but Democrats are poised to extend it or even make it permanent as part of a massive legislative package they intend to pass using a process called budget reconciliation that lets them bypass the 60-vote majority required to pass most legislation in the Senate.
Republicans used the same process when they doubled the child tax credit’s maximum value in 2017, and while no GOP lawmaker is likely to vote for the Democrats’ reconciliation package, most Republicans have been relatively muted in their criticism of the monthly payments. Some, like Sens. Mitt Romney and Mike Lee of Utah and Marco Rubio of Florida, have even proposed their own version of monthly child tax credit payments.
“The Republican Party is undergoing a significant realignment around more working-class constituencies, and the conservative establishment hasn’t caught up,” Hammond said. “I think a lot of the quietism is a function of a lot of folks not knowing where to stand on this because they’re still feeling it out, and they’re grappling with the fact that the people in Florida who voted for Trump also voted for a $15 minimum wage.”
The Democrats’ hope to unveil their reconciliation package before Congress breaks for its annual recess in August, but it’s unclear how quickly it could pass. The party will need the votes of all 50 members of its Senate caucus and nearly every member in the House to put the legislation on Biden’s desk.
“This is hugely historic,” DelBene said. “We don’t have many opportunities to make such an incredible difference, and that’s why this is such a critical time to make it permanent. We can’t let this pass us by when we know the long-term impact we’re going to have on families.”
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