Extending the child tax credit would boost Virginia's economy, experts say


The expanded child tax credit is set to expire next week. Policy experts say that would cut off critical aid to tens of thousands of Virginia families.

The expanded child tax credit — a major part of the $1.9 trillion American Rescue Plan signed by President Joe Biden in March — will expire on Dec. 15 if Congress does not take action.

The Build Back Better Act, which Congress has not yet voted on, would extend the child tax credit, offering eligible families a tax break of up to $3,600 per child through 2022.

Almost every Democratic member of Congress supports the bill in its current form. Two holdouts — Sen. Joe Manchin (D-WV) and Sen. Kyrsten Sinema (D-AZ) — have not yet committed to voting for the bill, which has threatened its viability in the Senate.

Polling shows that Americans broadly support Build Back Better. Most American voters say it's "urgent" for Congress to pass the bill, according to a recent survey conducted by the polling firm Data for Progress. An overwhelming majority of Democratic voters (82%) said it was "important" or "very important" to pass the bill by the end of this year, according to the survey.

Policy experts say that if passed, the White House's ambitious spending package would both lift tens of thousands of Virginia families out of poverty and boost Virginia's economy in the process. The Commonwealth Institute, a Virginia-based think tank, estimates that extending the expanded child tax credit would provide $2.3 billion to 1.6 million Virginia children — an average yearly benefit of $1,648 per eligible household. As a result, 89,000 Virginia children would be lifted out of poverty.

If Congress extends the expanded child tax credit, Virginia families would continue receiving advance monthly payments — $300 for kids under 6 and $250 for older children — through the end of next year. As a result, Virginia parents and caretakers would be able to spend more money on necessities like groceries and school supplies. That, in turn, would create 11,000 new jobs in Virginia, according to an August report from the Commonwealth Institute.

"One thing that both sides can agree on is that children ought to have the money they need to be nurtured and taken care of. The child tax credit is a valuable tool to do that,” said Jake Stewart, Director of State Government Relations at the Early Care and Education Consortium.

Historically, America's family support programs have lagged behind those of other Western industrialized nations. According to a report from the Niskanen Center, a moderate D.C.-based think tank, permanently increasing the child tax credit would make America's family support systems more like those in Canada, the United Kingdom, and most European countries.

Before the expansion, the child tax credit was only partly refundable, which disproportionately benefited wealthier Americans, according to policy experts. Last year, the congressional Joint Committee on Taxation projected that 40% of the $117.5 billion spent that year on funding the child tax credit would go to households making more than $100,000, while only 15% would go to households with incomes below $30,000.

As a result, roughly 530,000 Virginia children did not have full access to the child tax credit because their families did not make enough money, according to the Commonwealth Institute. Nationally, 27 million low-income children received a reduced credit, including about half of all Black, Latino, and rural children.

The expanded credit as provided for in the Build Back Better Act would ensure that every family earning less than $150,000 would be entitled to the full tax credit: $3,600 for children up to 5 years old and $3,000 for children 6 years of age and older.

The Build Back Better Act would also extend the program's monthly advance payments of $300 for kids under 6 and $250 for older children. These payments have been critical for Virginia families dealing with COVID-19 and its economic effects. Almost half of Virginia families (45%) used the extra money to pay for groceries, while 27% used it to pay the bills and 21% used it to make payments on their mortgage. Nationally, almost a third of American families used the credit to pay for school supplies, tuition, transport, and tutoring.

In August, the Census Bureau reported that self-reported food insufficiency and financial hardship among families with children declined after the first checks arrived.

"People who have the means to wait can receive a tax credit on the back end. Many families don't have those means. When your paycheck runs out, you can't wait until next year," Stewart said. "You need money then, you don’t need it six months later."

The fate of the expanded child tax credit remains uncertain. Manchin and Sinema have not said whether they will support the Build Back Better Act in its current form. Manchin in particular has been reluctant to support the child tax credit's expansion, which he has called "a work in progress." In October, Manchin told the White House he would only vote for the child tax credit expansion if it were tied to a work requirement and was only offered to families making less than $60,000 a year.

U.S. senators, by contrast, make $174,000 per year.

While Sinema has also refused to commit to voting for the Build Back Better Act, she has touted her past support of the expanded child tax credit. Two years ago, Sinema and Sen. Bill Cassidy (R-LA) introduced a bill that would have given families with newborns a cash advance of up to $5,000 on their child tax credit.

Sinema has pointed to her own family's economic hardship when she was a child.

"My family struggled," Sinema said in 2019. "We had hard times growing up, and for my mom, it was tough to take care of us kids for a bit after my parents got divorced."

On Monday, Senate Majority Leader Chuck Schumer (D-NY) and 95 moderate House Democrats urged the Senate to pass Build Back Better to prevent a lapse in payments to families in need.

"Families need to know that critical programs like the Child Tax Credit will continue uninterrupted," Schumer said on Monday. "This program has already done immense good for millions upon millions of families. Build Back Better will make sure these benefits stay in place."

Published with permission of The American Independent Foundation.