From JOHN RABY, FATIMA HUSSEIN and JOSH BOAK, Associated Press
CHARLESTON, WV — For the first time in six months, families will be left without a monthly deposit from the Child Tax Credit on Friday, a program that should have been part of President Joe Biden’s legacy but instead emerged as a flashpoint over who deserves government support.
Retired Andy Roberts of St. Albans, West Virginia, relied on checks to help raise his two young grandchildren, whom he and his wife adopted because the biological parents are recovering from drug addiction.
The Robertses don’t have $550 a month right now. The money helped pay for Girl Scouts, ballet and acting lessons, and children’s shoes, which Roberts noted were more expensive than adult shoes. The tax credit, he said, was “a godsend.”
“It will force you to tighten your belt if you have something to tighten,” Roberts said of the loss of payments.
The monthly tax credits were part of Biden’s $1.9 trillion coronavirus relief package, and the president has proposed extending them for another full year as part of a separate measure aimed at economic and social programs.
But Democratic Senator Joe Manchin, of Roberts’ home state of West Virginia, objected to the loan, fearing that the money would keep people away from work and that any additional federal spending would spur inflation, which has already reached nearly 40-40%. high year.
Last month, 305,000 West Virginia children took advantage of extended credit, according to the IRS.
Manchin’s opposition in the evenly divided Senate derailed Biden’s social spending package and caused extended tax credits that had been given out at the middle of each month to expire in January. This is cutting household income just as people are struggling with higher prices.
However, families have received only half of their 2021 loan each month, with the other half due upon tax filing in the coming months. The loan will be cut in 2022, with full payments only going to families who have earned enough income to pay taxes, a policy choice that will limit benefits to the poorest households. And loans for 2022 will only be made available after people file taxes early next year.
West Virginia families interviewed by the Associated Press highlighted how their grocery and gas bills have risen and said they will have to make do with less of a financial cushion than they did a few months ago.
“You have to learn to adapt,” said Roberts, who has worked as a car dealer for five decades. “You never dreamed that everything would suddenly explode. You go and buy a bag of hamburgers and it costs $7-8 a pound.”
The Biden administration estimated that the extended child tax credit and its monthly payments were a political success, with $93 billion paid out in six months. More than 36 million families received payments in December. The payments were $300 per month for each child aged five and under, and $250 per month for children aged six to 17.
The Treasury Department declined to answer questions about the expiration of the extended child tax credit, which has become a politically sensitive issue as part of a nearly $2 trillion Biden economic package that has stalled in the Senate.
Manchin supported some form of work requirement for people on pay, due to concerns that automatic government assistance could cause people to quit their jobs. However, his main objection, made in a written statement last month, sidestepped that issue as he expressed concerns about inflation and that a one-year extension hides the true cost of a tax credit that could become permanent.
“My fellow Democrats in Washington are determined to fundamentally change our society in a way that makes our country even more vulnerable to the threats we face,” Manchin said. He added that he was worried about inflation and the size of the public debt.
The Census Bureau examined the spending patterns of aid recipients in September and October. Nearly a third used the loan to pay for school expenses, and about 25% of families with young children spent it on childcare. About 40% of recipients said they mainly relied on the money to pay off debt.
There are separate benefits in terms of improved outcomes for poor children whose families were previously unable to receive the full tax credit because their earnings were too low. An analysis by the Urban Institute found that providing a loan designed by the Biden administration would reduce child poverty by 40%.
The tax breaks did not cause an immediate labor exodus, as some lawmakers feared. The Bureau of Labor Statistics said the percentage of people in employment increased from 58% in the month before monthly payments began to 59.5% last month. The same trend was seen in West Virginia, where the employment-to-population ratio rose to a pre-pandemic level of 52.9%.
There is debate in academic circles about whether credit can stifle employment in the long run, with most studies suggesting the impact will be statistically insignificant.
Scholars studying the tax credit don’t understand how a permanent program will impact the economy and children’s well-being.
Katherine Michelmore, an associate professor of public policy at the University of Michigan, and two other researchers estimate that roughly 350,000 parents will leave the labor market, which is not a big deal in an economy with about 150 million jobs.
Michelmore said the long-term effects of the permanent tax credit will have a positive impact on the economy, as children who grow up in higher-income families “generally do better in school, they are more likely to graduate from high school. It may be 15 years from now, but there will be more cost savings in the future.”
One of the key questions for politicians is who is better at spending money on children: the bureaucracy or the parents. Manchin proposed a 10-year funded version of Biden’s economic proposal that would remove the focus on child tax credits and instead fund programs like universal preschool to avoid sending money directly to families.
“It’s a moral question: Do you trust families to make their own decisions,” Michelmore said.
Barber Chelsea Woody is a single mother from Charleston, West Virginia who works six days a week to make ends meet. The extended child tax credit helped pay for her son’s daycare and also allowed her to splurge on clothes for him.
“It really helps a lot. It’s an extra cushion instead of worrying about how I’m going to pay my bills or something will happen,” Woody said as she loaded groceries into the car. “It’s useful for a lot of people. It helps working families because we struggle the most. I almost never go home with my baby because I work all the time.”