It’s Official: 3.7 Million Kids Reentered Poverty After End of Child Tax Credit
The Child Tax Credit was wildly successful in helping lift families out of financial hardship. But now it's gone.
The Child Tax Credit, the expanded credit that gave millions of parents hundreds of dollars per month per kid in an expanded tax advance program, was an overwhelming policy success of 2021 — only to not be continued in 2022. Though the Biden administration had planned to extend the expanded child tax credit into the 2022 tax year with the Build Back Better Plan, those hopes were shot in the dust by the moderate Senatorial duo of Joe Manchin and Kyrsten Sinema. The impact of the cash benefits was immediate — and the lack of them, new data has shown, has been equally immediate, with 3.7 million kids falling back into poverty in the month the child tax credit expired.
The Child Tax Credit, part of the American Rescue Plan enacted near the beginning of the pandemic, ensured $300 cash payment support to parents starting in July of 2021 and ending in December of 2022, with the second half of the cash, in a lump sum, to be distributed at tax-filing time in 2022. The most at-need families found themselves lifted out of poverty.
Early data showed incredible results tied directly to the tax credit. Approximately 4.1 million kids were lifted out of poverty due to the extra monthly cash, with parents using the extra monthly income to pay for necessities such as housing, food, utilities, and childcare. Even parents who didn’t struggle to provide necessities used the Child Tax Credit to pay for rent, food, and utilities, too. The cash helped families stabilize at a time when work, child care, school, the cost of living, and just about every aspect of modern life were upended during COVID-19. But those facts of life are not suddenly solved — inflation is still high, rent, child care, and even used cars are more expensive than ever, and the cost of the monthly grocery bill is just solidly up.
And that makes the fact that the last Child Tax Credit payment was released in December, with no plan to start up again soon, so devastating. Because experts knew this would happen and it’s now official: 3.7 million kids have reentered poverty. The Center on Poverty & Social Policy at Columbia University ran the numbers, noting “the monthly child poverty rate increased from 12.1 percent in December 2021 to 17 percent in January 2022, the highest rate since the end of 2020.”
The data showed that the 41 percent increase in poverty “represents 3.7 million more children in poverty due to the expiration of the monthly Child Tax Credit payments. Latino and Black children experienced the largest percentage-point increases in poverty.”
In the meantime, as parents struggle to make ends meet, they should at least be sure to file their income taxes as early as they can to claim the remaining credit cash. The IRS has already begun processing tax returns but is warning there will likely be delays so file ASAP. Still, though the tax cut will be welcomed, it won’t replace the financial benefit of monthly cash payments to the tune of hundreds of dollars per kid.
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