Last year, child poverty in the United States more than doubled, according to a new report from the U.S. Census Bureau. The sharp increase comes amid a broad rise in poverty rates across all ages, following two consecutive years of declines, thanks in large part to federal support during the pandemic. In terms of child poverty, the most important driver of growth in 2022 is the expiration of the expanded child tax credit, which the Biden administration and congressional Democrats were unable to renew last year due to opposition from Senate Republicans and Joe Manchin .
To talk about the report, I recently had a phone call with Christopher Weimer, director of the Center on Poverty and Social Policy at the Columbia University School of Social Work. In our conversation, we discuss why the child tax credit has been so successful at reducing poverty, whether states can fill the void left by the federal government, and what lessons should be learned from the pandemic era. Expand the social safety net.
What does this report tell us? How did it arrive at its conclusions about child poverty rates over the past year?
It shows what many were expecting, even using the supplemental poverty measure, which is a more robust measure of income poverty than the official U.S. measure and accounts for incomes that many official measures ignore, such as tax credits and in-kind payments. Welfare, etc., show a significant increase in the number of poor people from 2021 to 2022. As I said, this was widely expected because we know that a lot of the policy support for people’s incomes during the pandemic has expired in 2022. For children, the main thing coming due is the expansion of the child tax credit in 2021. This isn’t the only cause of child poverty and the increase in overall poverty from 2021 to 2022, but for children, that’s the story.
Do we know how much of the story it is?
Yes, the child poverty rate was 5.2% in 2021 and increased to 12.4% in 2022, more than doubling. We published an article last week showing that if the expanded child tax credit remained in effect in 2022, the child poverty rate would be about 8.1%, well below the Census figure of 12.4%. For children, poverty rates will still rise. But there is other part to the story. In 2021, we got a third round of stimulus payments, or so-called Economic Impact Payments. Some other expansions of the safety net also continue, such as emergency grants from the Supplemental Nutrition Assistance Program (break).
So, as far as we know, just over half of the increase in child poverty is due to credit expirations.
correct.
Your center wrote a report in early 2022 that looked only at the jump from December 2021 to January 2022 after the expanded credit expired and found that child poverty increased even more than the most recent Census report showed. . Could it get worse?
I think it’s important to understand that the numbers we release in 2022 come from our estimates of the monthly poverty rate. So we developed a method to try to understand a population’s poverty rate before the Census Bureau releases its annual statistics each year. An important and critical difference between these two measures is that our monthly series actually attempts to capture income inflows in a given month compared to the poverty rate in a given month, whereas the annual poverty measure captures the overall Revenue is summarized for the calendar year.
For example, our monthly series asks how monthly payments reduced child poverty in July, while Census data released last week asks how all incomes aggregate across the calendar compared with annual poverty measures. But despite their differences, both suggest that the expiration of the expanded child tax credit pushed more children into poverty, while the arrival of these payments lifted many children out of poverty.
Can you talk about how the child tax credit works and why you think it’s so successful?
The child tax credit has been around for about twenty-six years and has historically been part of people’s tax returns and refunds. The IRS calls it partially refundable, so for higher-income families, the credit can reduce the amount people owe when they file their taxes. Then, for low- and moderate-income families, they can get part of the credit as a refund at tax time. Before the 2021 expansion, the maximum credit available was $2,000 per child. Not everyone understands this. For example, the maximum refund you can receive per child is only $1,400.
Essentially, there is an income floor before you get anything. Then, as income increases, credit will gradually step in. Our center’s research shows that in its pre-expansion form, many children were excluded or left behind by this credit structure, particularly those in the lowest-income families. Many people received only partial credit, and some families with children received no credit at all. You need to have a pretty high income to get all the credit available to middle- and upper-class families.
In 2021, the American Rescue Plan expanded the credit line for that year and basically made three major changes. Among the changes is that it increases the maximum benefit level from $2,000 to $3,000 per child for older children aged six and over; and for younger children aged zero to five. , increasing from $3,600 to $3,600 per child. The second major change is that it makes the credit fully refundable and available to all families with children at the lower end of the income distribution, and is no longer tied to the income level of the parents. The third major change is that in the last six months of 2021, the credit will be disbursed on a monthly basis. So half of the credit is disbursed to most households between July and mid-December, and then the other half is delivered in early 2022 when households file their taxes. These are the three main changes. They existed only that year. And, from 2022, the law returns to its pre-pandemic form.
This year, after we found out the federal expansion wouldn’t be permanent, some states stepped in and tried to increase their own child tax credits. What do we know about these efforts? Is it too early to tell what effect they might have? How hopeful are you that the rise in poverty we’re seeing can be alleviated without the federal government stepping in?
