Will the American Families Plan Help Ease Poverty for Millions in the US?

Caroline de Braganza

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Give me your poorStux/Pixabay

The following words are from the sonnet “The New Colossus” written in 1883 by Emma Lazarus. The full poem is inscribed on a brass plaque affixed to the pedestal of the Statue of Liberty.

“Give me your tired, your poor, your huddled masses yearning to breathe free ...“

Many immigrants saw the Statue of Liberty as a symbol of hope when they arrived in the US.

President Biden’s plan announced to Congress on his 99th day in office, will bring hope to the millions of American families who have battled to afford the necessities such as food, clothing and rent before and during the pandemic.

The negative effects on people’s well-being, especially the stress and shame of being poor, can lead to a child struggling academically, and being less likely to complete high school. This results in their being less employable as adults, and the cycle of poverty continues into the next generation.

“Over 10 million US children were officially poor before the current pandemic, according to government statistics. In 2019, 14.4 percent of kids in this country, 10.46 million children, were living in poverty as measured by the official US poverty rate.”—Econofact.

A staggering 39.5 million Americans live below the poverty line.

The United States has reduced child poverty by almost half over the 36-year period from 1970 to 2016. The Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the Supplemental Nutrition Assistance Program (SNAP) have been effective in reducing child poverty.

In the United Kingdom, its child poverty rate halved in under a decade between 2001 and 2008.

The US has been lagging.

An analysis by the Organisation for Economic Co-operation and Development (OECD) comprising 26 nations, including the United States, United Kingdom, Europe, Japan, Australia, New Zealand, Canada and Mexico found:

  • The rates of poverty in the US are substantially higher than the average of the 25 nations—17.8 percent compared to 10.7 percent.
  • The United States has the highest rates of child poverty at 20.9 percent, where the overall average is 11.7 percent.
  • The poverty gap—the percentage by which the average income of the poor falls below the poverty line—shows that the United States has a poverty gap of 39.8 percent, the second highest behind Italy at 40.8 percent.

The increased Child Tax Credit will improve this situation.

Who qualifies?

You can check on this calculator from Omni Calculator, which helps parents with varying filing statuses (single filers, joint, head of household) to determine how much they might be getting.

The following qualify for the full $3000 credit ($3,600 for those six and under):

  • Single filers earning up to $75,000 per year in modified adjusted gross income
  • Heads of households making up to $112,500 a year
  • Couples filing jointly making $150,000 or less per year

Above these income levels, the payments would reduce by $50 for every $1,000 in income over the prescribed limit.

If you don’t qualify for the new 2021 child tax credit, you could still qualify for the original $2,000 tax credit.

This applies to:

  • Single filers who make up to $200,000 of modified adjusted gross income
  • Couples filing jointly making up to $400,000

Tax filers can receive an advance of up to half of the tax credit throughout 2021 from July to December, and the balance when they file their taxes in 2022. Filers can opt out of the advance payments if they prefer getting the lump when they file their 2021 taxes.

Please check with your tax advisor or the IRS if you’re not sure what to do.

When will the advances be paid out?

IRS Commissioner Charles Rettig has signaled they will be paid out monthly from July through December.

The IRS plans to have a portal up and running by July 1, where you can update any changes in marital status, income and number of dependents. The deadline for our 2020 taxes was extended to May 17, so if you haven’t already done so, file your tax return soonest!

Is the new child tax credit permanent?

If Congress doesn’t act, the credit will revert to $2,000 for the 2022 tax season.

In his American Families Plan released on Wednesday, President Biden called for a four-year extension of the higher amount to 2025.

But Democrats in Congress are seeking to make this permanent for American families with no expiration date. House Ways and Means Committee Chairman Richard Neal (D-Mass.) introduced a bill on Tuesday, April 27, Building an Economy for Families Act, making the increased child tax credit permanent.

Several Democratic Senators Cory Booker (D-N.J.), Michael Bennet (D-Colo.), Sherrod Brown (D-Ohio), Ron Wyden (D-Ore.), Raphael Warnock (D-Ga.), and Rosa DeLauro (D-Conn.) already support the bill.

“This is a lifeline to the middle class, it puts money in families’ pockets and it cuts all child poverty in half. It provides children and their families with additional payments throughout the year that help them with the cost of food, child care, diapers, health care, clothing and taxes,” DeLauro said.

Senator Michael Bennet says 41 senators support the bill.

“This is the kind of legislation that can bind our country together at a time when we desperately need it. We have a once in a lifetime opportunity in front of us, to strengthen our democracy and build an economy that works for everyone."

According to calculations from the Center on Budget and Policy Priorities, around 4.1 million children under 18 will be lifted out of poverty.

Let’s keep the momentum going.

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