How child tax credits will affect American families

Social scientists Amy Castro and Pilar Gonalons-Pons weigh in on how expanded child tax credits will impact poverty, gender relations, and future policy

Woman sits at a desk with a baby
Approximately 39 million households across the country will receive the child tax credits, which are projected to cut child poverty in half, says Amy Castro Baker.

As part of the American Rescue Plan Act of 2021, approximately 39 million households across the country will receive monthly payments in the form of child tax credits, an unprecedented expansion. While the child tax credit existed in former years, it was issued as an annual refund rather than in the form of monthly payments, and the maximum amount for 2020 was $2,000 per child versus $3,600 in 2021.

Payments will go out via the Internal Revenue Service on the 15th of every month beginning in July. Qualifying caregivers with children younger than 6 can receive as much as $300 per month and those with children over six up to $250 per month.

Penn Today talked with guaranteed income expert Amy Castro of the School of Social Policy & Practice and sociologist Pilar Gonalons-Pons, whose work examines gender, work, public policy, and family life, to find out how the expanded child tax credit will affect American households.

What does the expanded child tax credit mean for low- and middle-income families?

Gonalons-Pons: Having children is a massive expense; you can almost think about it as a risk factor for poverty. We don’t have affordable universal child care; we don’t have many of those supports that would make family life and work more compatible. Households that have young children are at risk of poverty and providing income assistance to these households in the form of a child care tax credit provides a gigantic help, essentially by offsetting some of these losses of income that come as a result from the fact that our society is not supporting parents.

Castro: The thing that’s most exciting about the child tax credit is that it really mirrors or mimics a guaranteed income versus a basic income. For families who qualify, it’s going to stabilize some degree of income volatility, meaning money unpredictably going up and down every month. What that’s going to mean for parents is the ability to weather the stress of the pandemic a little bit better. And then beyond the pandemic, if the child tax credit becomes permanent, which I think it probably will, it will stabilize households through the recurrent shocks that are part of American financial life.

An estimated 88% of American families will receive this benefit automatically. That suggests it’s going to be very difficult to roll back. What might the long-term effects be?

Castro: I’ve seen estimates that are everywhere from 88% to 92, which is outstanding. We’re projected to cut child poverty in half with the tax credit, which is extraordinary. We have not seen a meaningful focus on poverty writ large in decades. I can’t even remember the last time that we tried doing something like this in America, where we were not excluding groups based on race or based on ethnicity or based on gender, so actually truly hitting the majority of families with kids.

Oftentimes people will point back to the New Deal era, but if you were Black or brown you were locked out of most of those benefits, and it created inequality over generations. So, it’s pretty remarkable. Right now, we do have bipartisan support for it. The places where I think there’s likely to be pushback in the future will be during the inevitable efforts to make it permanent. One of my big fears is that, as upper-middle-income households recover from the shock of the pandemic, we will lose this window that we’re in right now to pass progressive legislation that can actually shore up American households.

It’s going to be extremely difficult to walk this back when people actually get those payments. It’s not as though the world opening back up and vaccinations suddenly eliminate the fact that 40% of Americans couldn’t afford a $400 emergency before the pandemic. We were already experiencing drastic wealth and income inequality. From my perspective as a social scientist, it seems as though they’re trying to prompt the federal government to lead, beyond just leading at the White House.

Gonalons-Pons: I think that it is possible—very, very possible—that it will become a permanent benefit. One thing that has been studied in political science is which social policies are more likely to be rolled back versus others. The universality aspect—meaning a large part of the population will be receiving this benefit—is often seen as something that helps policies remain supported by the public and makes them harder to be changed or cut. Other policies that target specific segments of the population are more vulnerable to cuts and rollbacks.

What about the fact that it is targeted for families and not for a low-income population at large?

Castro: I think some of that just has to do with political palatability. But at the same time we had bipartisan support for cash payments under Trump. The moment when the Cares Act was passed was arguably one of our most divisive moments in U.S. history. And yet at the same time we had support from both the right and the left for cash. It wasn’t recurring, it was smaller than it should have been, but it was a signal that it’s possible. I would like it to go beyond just children because it’s not only parents that are vulnerable. But it’s a great start.

How might this bill affect culture and gender divides?

Gonalons-Pons: One of the concerns among feminist analysts is the worry that child tax credits could be disincentivizing women’s economic participation because it might make it less ‘necessary’ to rely on their income. It makes it more affordable, or more plausible, to have a stay-at-home caregiver, and given the gender norms and gender expectations of our society, we know who that at-home caregiver will be, which will be disproportionately women. In the context of heterosexual dual-earners, I think that there is a risk that the child tax credit basically means that the woman pulls out of the labor market and moves back to part-time. 

We should never forget that for single-parent homes the child tax credit is absolutely a good thing. Without affordable child care, you cannot have a full-time job. There’s a case to be made that we shouldn’t worry too much about a small portion of the population where there might be like gender-reinforcing impacts. As for most policies, the results will be a mixed bag. Some outcomes will be definitively positive and extremely helpful, while other outcomes might reinforce gender patterns among a segment of the population.

Why child tax credits instead of universal child care? Is it because tax credits are an easier sell?

Gonalons-Pons: Yes. Also, we cannot forget the context of a pandemic: massive job loss, massive poverty. It’s a faster policy in terms of providing economic relief. It is a lot faster to send checks versus building public infrastructure for child care, which is going to take years and is going to be really difficult because there’s going to be opposition. It’s also going to need a long-term investment, which is always where some of the roadblocks will be. 

The conservatives want to frame the debate as if giving families money is giving them a choice, whereas instituting universal child care is telling families what they need to do: leave their kids in child care and go back to work. That’s absolutely not how I see it, but that’s how these policies are being pitted against each other.

Is child tax credits versus universal childcare an either/or choice for America?

Gonalons-Pons: I don’t think so at all. There’s certainly the money to do it, and the fact that we haven’t done so is that there’s been corporate opposition to a lot of the family policies. Even if you look across the U.S., the states that have passed paid family leave—which is a policy that honestly is pretty cheap; it shouldn't really be a big deal—in each state where that has happened there has been fierce opposition by corporations and by conservatives. 

The fact that conservatives oppose that is paradoxical to say the least because it’s actually paying people to stay at home until they bond with the children. But conservatives are also very pro-business, so there has been opposition to proposals that mean investment in these kinds of timely supports that has been active for decades. We shouldn’t forget that. It’s not that we haven’t thought about these policies before; there have been attempts and that those decisions have been shut down. And now there’s a different momentum.