The enhanced Child Tax Credit (CTC) from the American Rescue Plan Act (ARPA) has been a transformational policy, benefitting nearly 1 million Kentucky kids and lifting 69,000 out of poverty — but that policy is set to expire at the end of the year without further action from Congress. If we are to wipe out child poverty in Kentucky and across the country, and give our children and economy a brighter future, Congress should act this year to make the enhanced credit permanent by including it in the federal budget now under development.
The transformed tax credit is good for kids’ health and Kentucky’s economy
Beginning July 15, advance CTC payments started going out to Kentucky families. Instead of the usual one lump sum when they file their 2021 tax return in 2022, families have been receiving half of the credit up front in the form of monthly payments, which will end in December. Over the last two months, the $250-$300 per child has helped many Kentucky families with children pay for food, rent, school supplies and other critical needs. And unlike previous years, families with low incomes are eligible for the full amount of the credit, which is also larger this year.
Receiving a portion of the increased 2022 CTC early has assisted a huge number of families. National data from the Census Bureau’s Household Pulse Survey shows that just one and a half months in, food insecurity decreased among one-third of U.S. adults living with children. Food insecurity is detrimental to children’s health, often leading to an increase in lifetime asthma symptoms and higher rates of emergency department use. The monthly CTC has meant more families can afford to purchase the high-quality food children need to thrive.
While poverty is deeply harmful to children, income supports for families reduce poverty and hardship and have lasting positive impacts. Children whose families receive income supports perform better academically, work and earn more later in life and are healthier across their lives.
The increased and advanced CTC payments were projected to reach 93% of Kentucky children and could not come at a more crucial time. National job growth has slowed due to the rise in cases brought on by the rapid spread of the Delta variant.
The relief not only helps families now and children throughout their lives, it also strengthens our economy. Hundreds of millions of federal dollars are flowing into Kentucky’s economy through the CTC, and money given directly to individual families quickly ends up back in local economies. Because families with children tend to have higher expenses and earn less (being earlier in their careers on average), they are more likely to spend than save additional income.
The benefits can be even greater as more families can be reached and assisted to sign up. Some eligible Kentucky families are not receiving the payments because they have not recently filed their taxes or signed up using the IRS Non-filer tool, leaving $174 million on the table. Some of these same children are also eligible for the Economic Impact Payments (EIPs), also known as stimulus payments, but have not yet received them. The potential total payments for the CTC and EIPs for families in Kentucky could be up to $306 million.
Kentucky families are talking about how the payments have already helped
The benefits of the CTC are already being felt by Kentucky families, who report using the payments for back-to-school fees, supplies, clothes and shoes, expenses related to extracurricular activities like camps and sports, child care, debt repayment, rent, utilities, basic necessities, health care including dental care and needed therapies, diapers, haircuts and more.
“It’s a true blessing to me! Being a single mom, [I] didn’t know what we were going to do.” — April from Henry County
“It will help with clothes and [my granddaughter’s] personal needs and her school stuff. We live on a fixed income … so it really helps.” — Grandmother from Central Kentucky
“When the pandemic started my husband’s work slowed down, he lost all his equipment and since then our family has fallen behind financially. This child tax credit has helped me more than I thought [it would]. It helps me pay bills I otherwise wouldn’t have the money for and would fall behind.” — Parent from North Central Kentucky
“As a single mother and business owner, it will help cover bills when illness or unexpected expenses happen. Instead of worrying about paying bills and getting behind waiting on a tax refund, it will help me stay current on my bills.” — Rachelle from Rockcastle County
“[The CTC] helps us maintain housing and food without using savings. Please extend this benefit!” — Parent from Central Kentucky
“The CTC will allow us not to stress so much each month. Especially if something unexpected comes up.” — Amanda from Jefferson County
“It has helped us a lot with bills and school clothes. I am very thankful for it.” — Parent from North Eastern Kentucky
“It’s an extra lifeline for the middle of the month.” — Cassia from Jefferson County
“It will help to lighten the debt-to-income ratio of my family by providing some much-needed extra income.” — Anonymous parent in Kentucky
“It relieves us of the painful decision: say no to extras…like camp, classes and enrichment activities… because we can’t afford them, or take on another job and miss more time with our kids to be able to afford the extras.” — Jessica from Jessamine County
“It has helped us provide better care for our child.” — Michelle from Kentucky
To reduce child poverty and improve outcomes, Congress must make enhanced CTC permanent
Making the CTC improvements permanent as part of the budget reconciliation plan moving through Congress right now will ensure that this transformational policy continues to set a higher trajectory both for Kentucky’s kids and our economy. Experts estimate that making ARPA’s CTC provisions permanent would reduce child poverty in America by more than 40%. Failing to act on this opportunity would take away vital support from Kentucky families and hamper our economic recovery and future.
Note: Stories about the CTC were collected via survey and may appear slightly edited for spelling and punctuation.