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New website answers Michiganders’ questions about expanded Child Tax Credit

Contact: Lauren Slagter, 734-929-8027, lslag@umich.edu

ANN ARBOR — A new website from Poverty Solutions at the University of Michigan offers step-by-step guidance for parents to ensure they receive the expanded Child Tax Credit, which is worth up to $3,600 per child, per year. 

The American Rescue Plan Act of 2021 increased the Child Tax Credit to $3,600 per year for children under 6 years old and $3,000 per year for children 6-17 years old. That means a single parent with a 4 year old and 7 year old would receive $6,600. The tax credit does not count as additional income that could affect eligibility for public assistance. The expanded Child Tax Credit will be paid out in regular payments rather than once a year, with monthly payments from the IRS of $250-$300 per child expected to start in July. 

The first step to receive the tax credit is to file taxes for 2020, and the tax filing deadline is extended to May 17 this year. Parents of children under 18 may be eligible to receive this money, even if they have not previously filed taxes and have low or no earnings. Visit the Child Tax Credit: What You Need to Know website to learn more about eligibility for the expanded tax credit and see answers to frequently asked questions. 

A recent survey of more than 10,000 households with low incomes, fielded by Propel in partnership with Poverty Solutions, shows the need for user-focused information on how to access the expanded Child Tax Credit. Propel runs a smartphone application used by people who receive food assistance, and less than half of those surveyed know about the Child Tax Credit and feel like they understand it. Families who are aware of it and understand it call it life changing. 

“The expanded Child Tax Credit provides significant support for families and promises to lift millions of children out of poverty. The Child Tax Credit: What You Need to Know website aims to provide clear information that parents and service providers can use to make sure families receive this money,” said Afton Branche-Wilson, assistant director of community initiatives at Poverty Solutions at U-M.

This new model for the Child Tax Credit moves the U.S. closer to a universal child allowance, similar to what is offered in the United Kingdom and Canada. A universal child allowance provides monthly cash support to all families with children, whereas the Child Tax Credit previously used in the U.S. was paid in an annual lump sum and families with no earnings were not eligible. 

“Raising kids is expensive. We know that many families face challenges covering the costs of rent, utilities, child care, and food on a monthly basis, and the flexibility that a child benefit like this provides can enable them to use the money in the ways they view as most important in raising their families,” said Poverty Solutions Faculty Director H. Luke Shaefer, who is the Hermann and Amalie Kohn Professor of Social Justice and Social Policy and associate dean for research and policy engagement at U-M’s Gerald R. Ford School of Public Policy. 


In this episode of Michigan Minds, Luke Shaefer explains the Child Tax Credit in President Biden’s stimulus plan and how the University of Michigan is helping families navigate the process through the Poverty Solutions presidential initiative.

Shaefer is among a group of poverty scholars who have contributed significant research on the potential for an expanded child tax credit that follows the design of a child allowance to reduce child poverty rates in the U.S. Recent estimates from Columbia University’s poverty center find that this expanded Child Tax Credit will reduce child poverty by 45% overall, by 52% among Black children, by 62% among Native American children, and effectively eliminate the most extreme forms of child poverty, such as Shaefer wrote about in his book co-authored with Kathryn Edin, $2.00 a Day: Living on Almost Nothing in America.

“The American Rescue Plan is the boldest vision for fighting child poverty in the U.S. in at least 50 years,” Shaefer said. “Research shows if we can intervene while kids are young, it’s going to pay dividends in terms of higher academic performance, lower engagement with the criminal justice system, and higher earnings over a lifetime.” 

However, this expansion of the Child Tax Credit is temporary; the American Rescue Plan puts it in effect for one year. Shaefer said it is important to document and analyze how the expanded Child Tax Credit affects families’ experience of material hardship in the coming year in order to inform debates about permanently offering the benefit. 

“A permanent child allowance would provide a base level of support for middle-class and low-income families to rely on, and it would create a stronger safety net for our country,” Shaefer said. “We are better off as a society if we invest in our kids.”

Related 

Child Tax Credit: What You Need to Know factsheet (also in Arabic, Bengali and Spanish)

Listening to SNAP Participants to Improve Access to Expanded Child Tax Credit (policy brief)

Coronavirus Stimulus Payments website

Material Hardship and Mental Health Following the COVID-19 Relief Bill and American Rescue Plan Act (policy brief)

U-M research on material hardship in 2020 offers guidance for next economic relief package

Contact: Lauren Slagter, 734-929-8027, lslag@umich.edu

ANN ARBOR—Material hardship in the United States rose significantly in the final months of 2020 and was particularly high for households with children, according to new research from Poverty Solutions at the University of Michigan. 

The rise in hardship occurred at a time when the income supports from the first COVID-19 relief bill, the Coronavirus Aid, Relief and Economic Security (CARES) Act, had largely expired and the months-long economic recovery had stalled. Adults with children reported food insecurity and housing hardship at a rate 70% to 100% higher than adults without children, according to the research, which is outlined in a policy brief titled “Trends in Hardship and Mental Health in the United States at the End of 2020.”

These findings can help to inform the scope and scale of the next COVID-19 relief effort currently being debated in Congress. The authors—Patrick Cooney and H. Luke Shaefer—argue that based on the success of the CARES Act, Congress should expand and extend unemployment assistance and target support directly to households with children by expanding and making fully refundable the Child Tax Credit.

Shaefer, who is the Hermann and Amalie Kohn Professor of Social Justice and Social Policy and director of Poverty Solutions, and a number of other leading poverty scholars have proposed expanding the existing Child Tax Credit and transforming it into a monthly child allowance. The Biden administration and U.S. Sen. Mitt Romney (R-Utah) are now advancing similar proposals. Estimates suggest the Biden administration’s proposed expansion of the Child Tax Credit would reduce child poverty by 45%.

“Expanding the existing Child Tax Credit, making it fully refundable, and dispersing it on a monthly basis would bring immediate support to families struggling during the COVID-19 crisis and dramatically reduce child poverty over the long-term,” Shaefer said. “Children have long been among the poorest in our country. Now is the time to do something transformational for struggling families.”

This is the second brief from Poverty Solutions tracking hardship through the pandemic. The research includes reported food insecurity, housing hardship, financial instability and mental health symptoms from August 2020 to January 2021, through the U.S. Census Bureau’s Household Pulse Survey, a nationally representative survey deployed regularly since early in the pandemic.

The authors found hardship increased steeply beginning in November 2020, as COVID-19 cases rose, the economic recovery slowed, and CARES Act income supports may have been depleted. By December 2020, the unemployment rate had plateaued at 6.7%, there were still roughly 9 million fewer Americans working than in February 2020, and the number of long-term unemployed continued to rise, suggesting many were still unable to find work.

Household Pulse data from January suggests the relatively modest COVID-19 economic relief bill passed in late December 2020 may have provided a necessary lifeline for many households, though it is unclear if it will be enough to significantly reduce hardship. 

“This data is consistent with other analyses that found monthly poverty rates have increased in recent months, after we initially saw poverty drop and hardship stabilize after the CARES Act,” said Cooney, assistant director of economic mobility at Poverty Solutions. “It’s possible those initial supports were able to sustain struggling households for awhile, but by late fall, it appears that money had been exhausted for many who still could not find employment.”

Read the full policy brief

Related

Expanding the Child Tax Credit in the age of COVID-19

Hardship and Well-being in the United States after the CARES Act (July 2020)