The federal expanded child tax break program with monthly payments starting Thursday is one of the best ways the government can allocate their money to fuel economic growth and help the country’s youth, University of Maryland economist Melissa Kearney told CNBC.
“I think that this expansion of the policy is both politically and economically feasible – and in general a very good policy – is the fact that it targets families with children,” said Kearney on Thursday in an interview with “The Exchange” .
“Frankly, this is one of the best ways the federal government can and should spend money from a social return perspective,” added Kearney, whose research focuses on domestic politics with an emphasis on inequality and poverty.
More than 35 million families received the first of six monthly child tax credits on Thursday, according to the US Treasury Department and the Internal Revenue Service. The first round of payments will reach nearly 60 million children and amount to about $ 15 billion, according to the agency. The average payout this round is $ 423.
Parents and caregivers of nearly 90% of children in the United States will receive the stimulus payments included in the $ 1.9 trillion Covid relief package signed by President Joe Biden in March. The program is a historic attempt to reduce child poverty in the country by 50% and represents one of the largest poverty alleviation efforts in the United States since former President Lyndon B. Johnson began the fight against poverty in 1964.
Kearney, who is also a research fellow at the National Bureau of Economic Research and a resident senior fellow at the Brookings Institution, said “We have tons of evidence” showing that increasing family income leads to improved educational and economic outcomes for children leads that persist into adulthood.
While families have received child tax credits for years, Biden’s American Rescue Plan increased the amounts paid per child, low-income qualified families with little or no taxable income, and changed the distribution of payments so that families received half the total monthly. Direct deposits from July to December.
Families receive $ 250 a month for each child 6-17 years old for a total of $ 3,000, while the monthly payout for each child under 6 years old is $ 300 per month for a total of $ 3,600 corresponds to.
The following taxpayers are eligible for the full amount: individuals earning $ 75,000 or less, householders earning $ 112,500 or less, and married couples who collectively earn tax less than $ 150,000. Payments for those earning above this income level are starting to run out.
In a note released Tuesday, analysts at investment bank Cowen said these child tax credits are an “underrated incentive” that could boost sales in the retail, restaurant and travel industries as nationwide spending spikes due to Covid vaccinations. Cowen analysts predicted families will spend their money on home groceries, eating out, and shopping online. They also expect the one-year aid program to be extended through 2025 through a law of reconciliation.
“It will certainly add to spending, but most importantly, it helps families care for the needs of children,” Treasury Secretary Janet Yellen said in an interview broadcast on CNBC’s Closing Bell Thursday .
Kearney said paying the child tax credit in monthly installments wasn’t necessarily a step in creating a broader universal basic income program in the United States. However, she said that this pandemic policy would “ideally” pave the way for a child support program in the future.
Many other developed countries, including Canada, Germany and the UK, already offer monthly child benefit.
Kearney said separating the child benefit program from the “extremely complicated” US tax regime would help both the lowest-income families who need the support but not usually make enough money to file tax returns and the middle-income families. to find out if they will owe more taxes in April after receiving these payments.
She suggested the program could be run through the Social Security Agency.
“We could have a streamlined spending program that we could commit to in the federal budget, and then families wouldn’t have to do this really complicated dance to figure out how it affects their total tax credit and wonder if they’re going to get this one Check just to have to pay it back, “said Kearney.
“If we were to commit to this type of child benefit, we could raise taxes in a way that could cover this without changing all of our existing social security programs, which would essentially be required for an actual universal basic income that is not child-centric “Said.