WASHINGTON – For thousands of families in the Buffalo area and nationwide, getting $250 or $300 per month per child direct from the federal government will soon be as routine as filing their taxes.
It's all part of the most sweeping policy provision in President Biden's recently passed $1.9 trillion American Rescue Plan: an expanded child tax credit that will serve as a regular source of income for low- and moderate-income families with children. Researchers predict the provision will cut child poverty in half – and if that happens, the bill will have a particularly dramatic effect in Buffalo, the city with the nation's second-highest child poverty rate in 2019.
"Cutting child poverty in half – isn't that amazing?" said Senate Majority Leader Charles E. Schumer, a New York Democrat who steered the stimulus bill through the Senate.
The so-called child allowance is just one of several poverty-fighting measures in Biden's pandemic-related stimulus bill, which doubles as a thick, but perhaps temporary, extra layer in the nation's safety net. Low-income single people will get a tax benefit that poor families have long received. Unemployment benefits will be $300 a month higher through early September. The food stamp and low-income home energy assistance program, along with several others, will get big boosts.
Many of those provisions will likely go away with the end of the Covid-19 pandemic and the accompanying recession, but even some Republicans say the expanded child tax credit should be made permanent when Congress considers renewing it next year.
"I will say that this is good policy, and I do see myself supporting this long term," said Rep. Tom Reed, a Corning Republican who otherwise opposed the Biden stimulus plan, calling it a bloated and partisan effort.
How it works
Sen. Kirsten E. Gillibrand, a New York Democrat, last week urged state residents to file their taxes electronically, and as soon as possible.
Why? Because filing that tax return will be the key to unlocking an expanded child tax credit that, for many families, will serve as a guaranteed income.
"It's literally going to be a lifeline for millions of people in this country and millions of people in New York," Gillibrand said.
Gillibrand is urging people to file their taxes soon for a common-sense reason. Many families saw their income drop amid layoffs and furloughs in 2020, and it's quite possible that they will get more money from the child tax credit based on their lower 2020 income than if the IRS calculates the credit based on what they earned in the year before the pandemic. That's because the payments will phase out for single parents making more than $75,000 a year and for couples making more than $150,000.
The child tax credit isn't really new. It's existed in the tax code since 1997 and underwent a big expansion in the Republican tax overhaul of 2017, doubling to $2,000 per child.
But the Democrats this year expanded the credit in several big ways.
They expanded the credit to $3,600 for children under age 6 and $3,000 for those age 6-17. And they changed the credit so that it's not something families benefit from just at tax time.
Instead, the IRS will, under the legislation, pay the credit to families in advance. And while the legislation, for complicated legal reasons, calls on the IRS to make those payments only "periodically," it's widely expected that the agency will issue those payments monthly starting in July.
That means low- and moderate-income families will soon be getting monthly payments of $300 for each child under the age of 6 and $250 for children over that age.
That's likely to have a huge impact locally, said Andrea Ó Súilleabháin, executive director of Partnership for the Public Good, a Buffalo nonprofit that's been studying and seeking ways to address child poverty in the region.
"I think that this child allowance, or child stipend, is really important – because what we saw very clearly over the last year is how many of our neighbors don't have even their most basic needs met, right?" she said.
Many of Buffalo's children suffered in poverty long before the pandemic. Ever since the city's industrial economy started sliding in the 1970s, Buffalo has regularly recorded high childhood poverty rates.
But if researchers at Columbia University are to be believed, all that should change thanks to the expansion of the child tax credit. Columbia's Center on Poverty and Social Policy projects that the regular payments under the credit will cut childhood poverty by 51.1% in just a year.
And it's all because the new policy will push so much money to those near the bottom of the economic ladder.
"It is a pretty sizable transfer, and you could imagine families that have many children could be receiving pretty large increases in their income, which would probably put the family above the poverty line," said Neel Rao, an associate professor of economics at the University at Buffalo.
That's hugely important for both short-term and long-term reasons, Rao said. He noted that his research shows that more financially stable families have children that do better in the job market years later.
Writ large, the expanded child credit will also result in a sizable transfer of funds into the Buffalo metro area.
Some 25,408 children in Buffalo lived in poverty in 2019, the U.S. Census Bureau reported. Using Census Bureau estimates for the city's number of young children as well as older children, The Buffalo News calculated that the city's poor families would receive about $77 million in extra annual income because of the new child allowance.
Yet those figures show just a small slice of the bill's overall economic impact locally. Remember that the credit goes to single-parent families with incomes of up to $75,000 and two-parent families that earn up to $150,000 – meaning that many of the families that will receive the credit will be middle-income.
And while it's impossible, based on IRS data, to know exactly how many local families will receive the enhanced child credit, the IRS reported that 80,780 metro Buffalo families with incomes under $100,000 claimed the child tax credit on their 2018 tax returns. That indicates that at least 80,000 or so local families with similar 2020 incomes would qualify for the enhanced child credit – along with a difficult-to-estimate number of families with incomes between $100,000 and $150,000.
However those numbers add up, the enhanced child tax credit will produce a big influx of cash that will benefit the entire region, said Rep. Brian Higgins, a Buffalo Democrat.
For the poorest families, "that money will be spent on food, on rent, on, on necessities," Higgins said. "All of that will contribute to the growth of the economy."
A new war on poverty
People who work with the poor in Buffalo are excited about Biden's stimulus bill for more reasons than one. While aiming to lift the nation out of the pandemic-induced economic downturn, it's also a massive anti-poverty program.
"We're really hopeful that this child tax credit, along with the other provisions provided in the American Rescue Plan, will be wonderfully impactful for families that we serve here in Western New York," said Catherine Shick, communications director at FeedMore WNY, which runs the local food bank and Meals on Wheels programs.
In addition to the child tax credit, the stimulus measure will:
• Send $1,400 stimulus payments to single people with incomes of less than $75,000 and couples earning up to $150,000.
• Make childless workers eligible for the Earned Income Tax Credit, a move that will dramatically reduce taxes for 910,000 low-income employees statewide, according to Schumer's office.
• Extend federal unemployment benefits – with a $300 monthly enhancement – through Sept. 6.
• Expand funding for the Supplemental Nutrition Assistance Program, or food stamps, by 15% through September.
• Set aside $1.8 billion for child care in New York State alone.
• Bring the state an additional $1 billion for rental assistance and efforts to prevent homelessness.
• Allocate $4.5 billion more nationwide for the Low-Income Home Energy Assistance Program, which previous presidents of both parties tried to cut or kill.
• Expand the federal emergency paid leave program, one of Gillibrand's top priorities.
People who work with the poor laud all of those efforts while harboring one worry. Because the Senate passed the stimulus bill under an arcane procedure called budget reconciliation – which prevented Republicans from filibustering it to death – its provisions expire next year.
But Democrats are already planning to try to renew the child tax credit and the expanded Earned Income Tax Credit, seeing them as essential pieces of the long-term fight against poverty.
In total, Biden's bill delivers nearly 70% of its benefits to low- and middle-income taxpayers, who would receive an average 2021 tax cut of $3,000 under the measure, the nonpartisan Tax Policy Center reported recently. In contrast, nearly half of the tax benefits under the 2017 Republican tax overhaul went to families with incomes in the nation's top 5%.
The GOP bill "delivered a disproportionate amount of the funds to people who probably didn't need them," said Anthony J. Ogorek, a Williamsville financial planner. "And, you know, the Covid relief bill is doing the polar opposite."