While the success of one of these measures or something similar is not assured, I believe that, thanks to the pandemic, there’s a good a chance the United States will finally begin building the foundation that Nixon called for and that families still need.
That helps explain why child poverty in the U.S. is comparable to that in Mexico and Chile, and far higher than child poverty in other wealthy countries. Some 18% of U.S. children live in poverty, far above the 12% average for the 37 wealthy and middle-income countries that belong to the Organization for Economic Development and Cooperation.
One reason most industrialized countries have lower child poverty rates is that they make monthly payments to families with children. These payments are standard in Europe and have been since around World War II.
Canada, for example, provides families raising children up to age 18 with a tax-free benefit that averages a total of about US$5,000 per year.
The United Kingdom provides families with more than $1,500 yearly per child, which it phases out for people with higher incomes. The German government’s allowance for families amounts to more than $3,000 yearly per child. It offers additional benefits, depending on the circumstances. These benefits continue until children turn 25, as long as they stay in school or get vocational training.
Families earning at least $2,500 in income qualify for at least some portion of this credit, which is phased out for single parents with incomes of $200,000 or more and $400,000 for married parents who file their taxes together. Up to $1,400 can be refunded – meaning that it’s paid out to families – if their federal tax bill is smaller than the credit they receive.
Biden’s plan, also proposed by Massachusetts Democrat Rep. Richard Neal, chair of the tax-writing House Ways and Means committee, would increase the maximum payment for 2021 to $3,600 for children under 6. It also calls for $3,000 payments for children from 6 to 17 years old. Currently, the child tax credit isn’t available for 17-year-olds.
Increasing the money available to families would help, but what might help even more is the proposed change to how the child tax credit is administered. Currently, this is an annual benefit families may receive after filing income taxes. Instead, parents would get monthly per-child payments of $250 or $300, depending on the age of their children. Greater frequency could make a huge difference for cash-strapped parents who often run short of money needed to keep their pantries full and bills paid.
While the higher monthly payments in Romney’s plan may sound more generous, his approach might not be more helpful for the poor. That’s because he wants cuts to other programs that assist low-income American families, such as the Supplemental Nutrition Assistance Program, formerly known as food stamps, to cover some of the cost.
While Biden and congressional Democrats are calling for a new version of the child tax credit, which the Internal Revenue Service would continue to manage, Romney’s plan would provide monthly flat-rate checks from the Social Security Administration. Given that many poor people don’t file taxes and that the Social Security Administration already processes monthly payments to millions of Americans, I think this distribution approach would work better.
In my view, making monthly payments to U.S. families with children could, finally, signal a shift in U.S. spending priorities and reduce childhood poverty dramatically. Ample evidence indicates that investing in children works.
Joya Misra receives funding from The National Science Foundation and the Washington Center for Equitable Growth.