Let’s discuss something worth getting really excited about, the Biden/Romney child tax credit/child allowance proposals. These proposals would make life much better for poor children and their parents. A lot better. Neither proposal goes as far as I would like, but they would be a real improvement and could be made more generous over time.
I will briefly describe the proposals and then discuss the political changes that may have paved the way for a major shift in social policy.
What the proposals do
To see just how exciting these proposals are, it helps to remember what is wrong with our current system of support for families with children, which is centered on a partly refundable Child Tax Credit (actually, two credits) and the Earned Income Tax Credit. Matt Bruenig emphasizes these difficulties with the current system:
- Our Child Tax Credit is not fully refundable, which means that children in the poorest households do not benefit from it.
- The Earned Income Tax Credit is only available to families with significant labor market income. This again excludes the poorest households.
- The current child tax credit and the Earned Income Tax Credit are paid to families once a year, when they file their taxes. This makes it hard for families to budget.
- With the EITC, many eligible families (around 22%) do not apply, presumably because of the complex eligibility rules. It is likely that the same is true for the child tax credit.
The Biden and Romney proposals make full payments available to families without any labor market income. They would reduce the number of children living in poverty by a third, and reduce deep child poverty by 50%. They also pay families every month. For further discussion of the proposals see this from Hammond and Orr or this by Bruenig.
The politics of child payments
Part of the reason these proposals are so exciting is that they reflect a sea change in how we think about poverty, work, government. The poorest families were excluded from the CTC and EITC intentionally. The purpose was (depending on your point of view) to create incentives for poor people to work, to punish the non-working poor, to avoid giving the undeserving poor an incentive to have children, and, of course, to do all these things to poor Black people, especially women. A secondary factor in the structure of the current system was the tendency to run cash benefits through the tax code, to disguise them as tax cuts rather than just admitting they are benefits. These ideas and impulses have shaped our thinking and limited our options for decades, yet today we may be ready to send monthly checks to poor parents – often single mothers – who do not work.
Why might we be ready to give modest amounts of unconditional cash to poor families today, assuming we are? What changed? I can only guess, but here are some ideas.