The monthly child tax credit payments plan from the March stimulus package are going out to parents this week.
The Biden administration on Thursday is launching the biggest anti-poverty program undertaken by the federal government in more than a half-century, delivering monthly payments to the overwhelming majority of American parents for the first time.
The Department of Treasury said it has sent checks to households representing approximately 60 million children under a provision in the stimulus package passed by Democrats in March. The payments can be withdrawn Thursday but appeared in many bank accounts as early as Wednesday. The benefit, expected to cost roughly $120 billion per year, provides $300 per child under age 6, as well as $250 per child 6 or older. The administration previously said that roughly 88 percent of all U.S. children nationwide would receive the aid.
The program is a major political and economic test for President Biden and his administration. Already, the IRS has come under fire for producing a beneficiary website that critics say is difficult to navigate. Some experts think the White House is overstating the program’s anti-poverty impact. The payments are going out amid concerns that the U.S. economy is running too hot, which means they could further fuel inflation. And the White House’s attempt to extend the program beyond December is tangled up in broader congressional negotiations, leaving its long-term fate uncertain.
But White House officials say these criticisms risk obscuring the potentially transformational impact of the new child benefit. If successful, they say, the program could lift millions of American children out of poverty — which could translate into major improvements in child nutrition, educational outcomes and mental health for an enormous number of people. The benefit also could, at least temporarily, build on goals that Democrats advanced with the passage of the Affordable Care Act by trying to expand the federal safety net for millions of families.
“This is the biggest anti-poverty effort since Lyndon B. Johnson’s War on Poverty,” said Joshua McCabe, a historian of U.S. welfare policy at Endicott College. “This is a once-in-a-longtime chance to significantly reduce child poverty.”
For the vast majority of beneficiaries, or approximately 86 percent of those receiving the payment, the new monthly benefit will be automatically deposited into their bank accounts — with no action required. Richer families are excluded from the benefit. The credit diminishes for individuals with adjusted gross income of more than $75,000, as well as for couples earning more than $150,000, and disappears altogether for higher earners.
Crucially, however, the very poorest American families are eligible to receive the benefit in full. Before this year, families were excluded from the credit if they did not earn enough for their income to be offset by the tax benefit. The stimulus repealed that limitation, meaning even Americans with no earnings would still qualify for the entire deposit amount. The benefit was also made larger and will go out monthly, instead of when taxpayers reconcile their tax returns. These changes are set to expire at the end of the year, although Democrats in Congress are preparing a $3.5 trillion spending package that lawmakers hope will extend the benefit.
The administration has said the March stimulus plan will result in child poverty falling by as much as 50 percent, citing estimates of the child tax benefit from researchers at Columbia University and others. But concerns have mounted that this number is dramatically inflated. The data kept by the IRS is often out of date, particularly for low-income families in which custodial status changes frequently. And millions of other families, often the very poorest, have never filed income taxes — which means the IRS will have trouble finding them to give them the payments.
These concerns have been intensified by concerns that the administration’s attempts to reach these parents outside the tax system are inadequate and clumsy. An online portal — prepared by the tax preparer Intuit on behalf of the IRS — has been criticized as being difficult to use, lacking a mobile option, and being accessible only in English. IRS officials declined to answer questions about how much Intuit was paid to prepare the portal, or if it adhered to the agency’s expectations. An Intuit spokeswoman also declined to comment.
Do you have to have kids to get this? Like, can you have cats?Report
Blogging about video games may qualify you for the man-child tax credit, but those clowns in Congress still haven’t fixed the marriage penalty, so that’s going to cost you. It could help to invest in some action figures based on comics or 80s media franchises. I’m not sure what the relevant tax law on anime paraphernalia is. You really ought to consult a tax accountant.Report
I do wonder if there will be any Unintended Consequences from this but I’m one of the pro-natalists (despite my personal choices) and think that More People Are Good.
But I say that knowing that there are going to be a handful of excesses that arise from this and those excesses will be difficult to defend well… to the point where “this only happened in a couple of places!” will be one of the best defenses given.Report
As someone who believes in evolution as an actual ongoing phenomenon and not just a cudgel to beat icky fundies with, I worry about the pro-natal effects being heavily tilted towards those whose children are least likely to have highly positive externalities and most likely to have negative externalities.Report
Surely we won’t see *THAT* many people having kids for the extra…
How much extra a month? 300?Report
I don’t think anybody’s going to be farming children as a way to bring in extra income, but if you’re on the fence, this could push you over, especially if you qualify for other means-tested benefits.
I don’t know how strong the pro natal effect will be, but insofar as there is one, I’m pretty sure it will be stronger for low-income households than for middle- or high-income householdsReport
The only people who would do that are so dumb they have no hope of rational reproductive decision-making to begin with.Report
A friend related a story about how she was doing the mom thing of nagging her 12 year old to do chores, when he grumbled “I bet that’s why you had kids, just to get someone to do your job for you”.
Instead of being angry, the idea of children as being this endless font of free labor was so hilarious she actually had to sit down from laughing so hard and it took minutes to compose herself.Report
Relevant SMBC: https://www.smbc-comics.com/comic/the-future-of-choresReport
And then, shortly after the time they can do the heavy lifting stuff, they leave.Report
Recieved a check yesterday. Attempting to ‘opt-out’ later today. Will report back on ease of website. It looks like you have to go in through id.me so I assume my identity will soon be for sale to the highest bidder.Report
What does “opt out” mean here?
Also, unrelated question: Are you in Maryland, an Indian doctor, or an Indian doctor in Maryland? Not to put too much pressure on you, but I’m really rooting for the latter, and will be terribly disappointed if InMD stands for only one thing.Report
Opt-out means we stop getting the checks and whatever we’re due (if anything) factors into our tax return. Writing checks to the government hurts my soul and I’m worried that’s what would happen if I take them. If I wanted to pretend to be taxed less I’d move across the river and pay all their asinine registration fees, assessments and $1400 tickets for breaking the speed limit by 2 mph.
Regarding my handle, sadly I must disappoint.Report
I kept getting letters telling me to get excited for my child pre-fund and my initial reaction was pure annoyance.
Sure, at last count I have something like a million kids, but since this is a tax-code thing all the high-level info was that I wouldn’t qualify… which is fine if it’s an anti-poverty thing (not great if it’s pro-natalist thing)… so I was merely annoyed that they didn’t know that I obviously wouldn’t qualify.
Then I went to the website and saw I should get a couple hundred bucks plus or minus… and yeah, now I have to go and Opt-Out. While my taxes are very simple (all my income comes primarly from one tracked/taxed source) it is highly variable. And, as a result, I claim 0 dependents and do everything possible to maximize my witholdings because even though every penny goes through IRS charts for tax witholding, IRS charts are really bad with highly variable income. And it is painful to pay retail for taxes (the 5% don’t get any breaks) *and* stroke a large check even though all your deductions are minimized.
I get it, no one cares about the top-5% tax problems… but this is a 5% tax problem I don’t want to deal with.
A better system would be to look a *last* year’s income… if I qualify based on that, I keep it – no matter what I make this year. If I don’t, I don’t get it. But I don’t want checks that I’m going to have to pay back at tax time.
The regular IRS website, where I have an account, was useless… no obvious opt-out.Report
Belay the last sentence, the opt-out was way at the bottom and had to scroll past useless info to get to it… but it’s there at least… just offscreen.Report
Wait wait wait wait wait wait wait
There is going to be a non-zero number of people who, at the end of the year, will have to send money back to the government because they got this particular money?Report
Yes, it is a pre-fund of a new and expanded Child Tax Credit… you have to qualify for it and the checks are going out based upon various IRS assumptions. But until you have completed your Fiscal 2021 earnings, the assumptions may or may not align.
If the assumptions are correct, and I expect they will be for most folks, it will be a wash.
Directly from the IRS website:
A1. You may want to unenroll from receiving advance Child Tax Credit payments for several reasons, including if you expect the amount of tax you owe to be greater than your expected refund when you file your 2021 tax return. The payments you receive are an advance of the Child Tax Credit that you would normally get when you file your 2021 tax return. Because these credits are paid in advance, every dollar you receive will reduce the amount of Child Tax Credit you will claim on your 2021 tax return. This means that by accepting advance child tax credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase.Report
At a minimum, if I’m reading that correctly, many folks who might have typically received a $1-2k refund might see significantly less than that… since they already got it as a pre-fund.
I haven’t studied the minutiae of how all the different brackets will experience this… but I’d say there will be a non-zero number who will have to write a check and a much larger non-zero number who will be surprised that their usual refund is so small.
The biggest benefit… and I hasten to add, I’m in favor… is that folks who are outside of the Tax regime will get the funds. That’s the anti-poverty part.Report
I am now beginning to suspect that this is a great idea that has been done the completely wrong way and it will be declared a bad idea because of its execution.Report
It’s XX% stimulus … pulling forward funds from 2022 into 2021 and YY% anti-poverty by making people who didn’t earn enough to qualify for Tax Credit get funds.
Because it is a Tax Code stimulus, I think it will poison some UBI thinking because it’s not a net-new expenditure, it’s re-jiggering your refunds (with some new expenditures added in)
But yes, my suspicion is that we’re on track for an over-promise, under-deliver sort of thing… which we’ll experience in April as the mid-terms are warming up.Report
The alternatives, try to decide ahead of time who should get the credit, or miss people because without the credit they’d have no reason to file income tax, are worse.Report
The 2nd most terrifying presidential candidate in living memory had a plan that didn’t do it from the angle of taxes at all, but, instead, from Social Security.
It would cover the “miss people” angle (an angle that, from what I understand, is not quite covered at this very moment).Report
I presume that’s Mitt. Yeah, that would be good too/Report
We also were able to locate it and opt-out. Same deal with the ‘it’s coming!’ letters. We assumed our income was too high and everyone was getting them but then boom, got a check.
And yea, we are in a similar boat to you guys on the tax situation. Very simple, two W2s and a few deductions for mass offerings/charitable giving, state taxes, and our dependent deductions. We both withhold at the higher single level, no deductions, then file jointly in an effort to avoid owing at the end of the year. Seems silly to take a bunch of small checks then pay most or all of it back.
I am interested to see how the PR on this goes come tax time, especially if you get a lot of people on the margins that end up owing or getting little to no refund.Report
For maximum annoyance value, just pay it all back as estimated tax.Report
Dear IRS,
Enclosed please find endorsed Child Tax Credit Check, if you would be so kind as to apply to next year’s taxes, we would be very much obliged.
Yours ever,
MarchReport
The plan appears to be flawed.
Mittler Romney suggested doing it through the Social Security office but he was a Mormon.Report