In the past six months, 36 million families have received a monthly check from the IRS through the expanded Child Tax Credit – a cash injection that has helped pay for groceries, buy uniforms schools and reduce the costs of raising children. But now families face the first month since July without a government program check, even as inflationand the cases are multiplying.
If President Joe Biden’s Build Back Better Act had passed, families would have received a CTC payment on January 14 (because the 15th is a Saturday, the IRS would have issued the checks the previous business day.) But this project bill remains in limbo, which means parents won’t get a check on Friday.
“CTC is gone, but grocery prices haven’t come down,” said Stormy Johnson, 44, a single mother of three in Kingwood, West Virginia, who works as a student support specialist. “Now that I no longer have that payment, the reality of life is that there will be times when I won’t eat to make sure my children can.”
Johnson, 44, said the loss of payments means more stress for the whole family as her children are aware she will be skipping meals to make sure they have enough food. She brings home about $2,200 a month after taxes, including $1,600 for rent, car payments and car insurance. After paying other bills such as utilities, she is left with $50 per month.
The $500 in CTC funds she received for her two youngest children “has been a huge help,” said Johnson, who also has a 21-year-old child who was too old to qualify for the program. “This payment they’re withdrawing has hurt a lot of people a lot.”
10 million children at risk of poverty
There are plenty of working families like Johnson’s, living near the financial limit despite their jobs. Parents interviewed by CBS MoneyWatch said they plan to cut back on essentials like food as well as expenses like cable TV to try to cope with the double whammy of inflation on top of the expired benefit. Many worried about the impact on their children.
Anti-poverty experts say the impact on children could be extreme. Without continued monthly payments, around 10 million children are at risk of falling into poverty, according to a recent estimate of the Center on Budget and Policy Priorities (CBPP).
The extended CTC expired on December 31 when theamid opposition from Sen. Joe Manchin, a West Virginia Democrat whose support is crucial to the bill’s passage in a divided U.S. Senate. Although House Speaker Nancy Pelosi said Sunday that she with Manchin, it would not be time for families to receive payments this week.
Manchin backed some form of work requirement for people receiving the payment, fearing the automatic government aid could push people out of their jobs.
Yet the tax credits did not cause an immediate exodus of the labor force, as some legislators had feared. The Bureau of Labor Statistics reported that the percentage of people with jobs fell from 58% the month before monthly payments began to 59.5% last month. This same trend occurred in West Virginia, where the employment-to-population ratio reached the pre-pandemic level of 52.9%.
There is academic debate about whether credit could suppress long-term employment, with most studies suggesting the impact would be statistically negligible.
It is unclear whether the CTC will move forward in its expanded form even if Build Back Better is revived. Wall Street analysts, for their part, doubt lawmakers will renew the expanded program, with Goldman Sachs calling a full extension “highly unlikely.”
“A return to pre-2021 policy seems highly likely, although a much more modest expansion is still possible,” analysts at the investment bank said in a report on Monday.
The amount of the credit will be reduced in 2022 to $2,000 per eligible child, with full payments only going to families who have earned enough income to owe taxes, a policy choice that will limit benefits for poorer households. . And the credits for 2022 won’t come until people file their taxes early the following year.
Expenses for children
Nine of 10 families earning an annual salary of less than $36,000 spent the monthly Child Tax Credit payments for the most part, according to CBPP research. The top three spending categories were food, utilities and rent or mortgage payments, the left-leaning think tank noted.
Among them is Melissa Boyles, 63, who cares for her 16-year-old granddaughter, both of whose parents are deceased. With the extra $250 a month, Boyles was able to buy extras like a $36 roast and a type of pasta his granddaughter liked, as well as new clothes for the teenager.
To help ease the pain of losing her family, Boyles gave her granddaughter a puppy, but she now fears she won’t be able to afford the dog’s upkeep.
“I’m worried about giving the puppy up – he needs shots and dog tags, which are $6, but that’s a lot of money when you need milk and bread,” said Boyles, who explained that she and her husband were both disabled and receive a combined total of about $2,000 a month in benefits.
She is also concerned about Manchin’s reported insistence that if the expanded CTC were to be renewed, it should come with a work requirement — neither she nor her husband work as they are disabled. In Boyles’ opinion, many grandparents like her are caring for their grandchildren and are either retired or disabled, and she said this requirement would simply hurt children who are not at fault.
“Why should she be punished because her parents died and we are elderly grandparents looking after her?” Boyles said of her granddaughter.
Local economies suffer
The expanded CTC not only provided families with more leeway in their budgets, but also helped boost local economies, as money was typically spent on groceries, rent, clothing, education and other daily expenses.
In 2021, the enhanced program was expected to increase total US consumer spending by $27 billion and generate $1.9 billion in new local and state taxes, according to to a study by the moderate Niskanen Center. Florida officials said this month the state collected nearly $400 million more in taxes than expected, naming the CTC as one of the factors behind the surplus, according to at the Tampa Bay Times.
But as families cut spending, retailers and local businesses could also feel the pinch. Getting a monthly payment, rather than claiming the child tax credit each year when filing taxes, was a boon for families because it allowed them to budget, said Natacha Chavez, a mother of two from Phoenix. , Arizona, whose $500 monthly CTC check ended in December. .
Because Chavez lost his job over the holidays, the loss of the tax credit will hit household finances harder, she noted. Without the extra money, she cuts down on everything from gas to groceries.
“With gas prices going up, it didn’t seem that hard because there was that extra money in your budget,” from the CTC, Chavez told CBS MoneyWatch. “Now we have to think, ‘Do we want to take that extra trip?'”
Omicron surge, winter costs
Parents are losing monthly payments not only due to spikes in inflation, but as the country experiences a further surge in COVID-19 cases due to the Omicron variant. This strains family budgets and forces difficult decisions to be made. Chavez noted that she would like to buy high-quality K95 masks for her family, but said the cost was prohibitive.
Johnson, the single mother from West Virginia, said she was worried about schools returning to remote classrooms due to the latest COVID-19 surge, which would mean her children would lose breakfasts and free in-person lunches at school. “I’m really going to struggle” if that happens, she said.
Others point to child payments coming to an end as families also face higher heating costs in the winter, with inflation driving up energy costs sharply. The government has warned that households could see their heating billscompared to last year.
“We’re in the middle of winter in West Virginia, and people won’t be able to pay their gas bill, won’t be able to afford their food,” said Brian Butcher, a city councilman in Morgantown, West Virginia. , who is also a retail manager.
Butcher, 34, said he feared the expanded CTC would not be renewed due to opposition from Manchin to the tax credit, which had provided Butcher with $550 a month for his two children. To prepare, he and his wife cut their grocery budget, cutting it to $100 a week; and refinanced their car payment to reduce their monthly costs.
The CLC has reached about 350,000 children in West Virginia, said Ash Orr, a federal campaign advocate with the West Virginia Center on Budget & Policy. About 50,000 of those children are at risk of falling into poverty without the payments, with children in rural areas at greater risk, the nonpartisan policy research group found.
“When you’re located in these rural areas, things as simple as electricity and heating are more difficult,” Orr noted.
For now, families say they are reworking their budgets, with some holding out hope that the expanded CLC could return in some form. Anti-poverty experts also continue to advocate for the tax credit. Without legislative changes, the CTC in 2022 will revert to its previous form – a tax credit of $2,000 taken each year, compared to the expanded CTC credit of up to $3,600 per child, half of which is provided as monthly cash payments.
In the meantime, parents should file their tax returns as soon as they can to claim the other half of their CTC, which the IRS will provide through their tax refund, noted Greg Nasif, the association’s political director. anti-poverty Humanity Forward. The IRS will begin processing tax returns on January 24.
“With inflation, the Omicron variant and the end of CTC, it’s a punch families can’t take,” Nasif said.
—With Associated Press reporting.