Should We Increase the Refundable Child Tax Credit?

PUBLIC POLICY
Student’s Name
Course
Date
Introduction
The United States has been experimenting with diverse programs for improving the economic status of less privileged members of its society. One of these initiatives is the Child Tax Credit (CTC), which gained momentum during President Biden’s support as a progressive rescue plan with the potential to assist numerous children and their families in the nation. Researchers such as Acs and Werner (2021) recognize the impacts of this support and the economic differences it induces in some of the most vulnerable households and communities. CTC has existed in the U.S. for over two decades since Congress enacted it in 1997. Its original goal was to target middle-income children and provide them a non-refundable credit of approximately $400. Since then, Congress has been expanding it to improve its outlook and reach more families through clauses such as increasing the credit to $1000 and transforming it into a partially refundable one in 2001. Other adjustments saw its extension to include low-income households in 2009, with the latest temporary changes occurring in 2021. As a result, the effects occurring from different outfits of CTC have demonstrated that its expansion can have far-reaching and positive impacts on the lives of low-income Americans.
Thesis
CTC emerges as a noble initiative that has significantly assisted families in the United States shoulder the burden of raising children. Considering that the current allocation remains inadequate, this proposal recommends the expansion of the CTC by about $3500 annually for every child below the age of seventeen. This proposition also seeks to make the policy fully refundable to ensure it reaches all needy families and their children without pegging it on income levels. According to DeLauro (2021, s90), many children have remained disadvantaged by the existing CTC laws that link credit to income. This proposal eradicates this disadvantaging clause and incorporates families at the lowest socioeconomic levels, including those without incomes, into the program. Goldin and Mitchelmore’s (2021) exploration of individuals who benefit from the CTC funds reveals that although the past programs have helped a significant proportion of American families, they were replete with eligibility disparities due to the discriminative nature along racial and income lines. As a result, designing a more inclusive and expanded CTC is fundamental to ensure that it serves its intended purpose in America.
The Biden government’s experimentation of an expanded CTC policy in 2021 revealed innumerable potentials that the country could achieve by taking this initiative. Unfortunately, the plan was temporary to caution families following the covid-19 pandemic. Including all children except those from high-income families revealed that the country can induce improved and transformative social impacts (Marr et al. 2022). As a result, this proposal blends the recent elements of CTC with other alternative options to make it even more appealing and impactful. The idea is to develop a CTC plan that disburses full credit to caution families without any income to continue the economic assistance to the most vulnerable children in America. While advancing this perspective, the design will also consider the various drawbacks of uncontrolled financial aid in families. Some of these comprise the concern by Edelberg and Kearney (2023) that providing families with condition-free support would negatively affect the supply of labor in the nation. Others also raise issues with this money being redirected into self-destructive practices like alcohol and drug abuse by the unemployed parents rather than meeting the needs of the children.
My position is that providing full credit for all children below 17 years and integrating other metrics that will encourage parents to return to work faster and prevent misuse of the funds is achievable and appropriate. In this context, the CTC design will provide half of the credit to households without income and integrate a slowed rise to full credit as their income increases. This partiality of the CTC to families with no income will also address the worries of parents redirecting the funds to substance abuse and encourage them to supply labor to benefit from the total credit.
Such a policy is ideal for offsetting the financial burden parents in middle and low-social economic brackets incur while raising their children. DeLaurao notes that financial support is critical for meeting the children’s essential needs, including healthcare, food, clothing, and other expenses. Parolin et al. (2021) note that increased finances in vulnerable families have been associated with rapid improvements in food sufficiency. Such an aspect is a critical determinant of health. The author also indicates that such support gradually eliminates other material hardships because it transforms the economic potential of the beneficiaries. The truth is that a significant proportion of the United States population continues to languish in poverty due to a lack of employment or increased accumulation of taxes that leave their families without disposable incomes. As a result, the expansion of the CTC policy is a progressive proposal with the potential to transform millions of financially burdened families in the nation.
Will This Policy Proposal Solve the Problem?
Supporting Evidence
Supporters of CTC expansion to reach more needy children and their families raise convincing evidence demonstrating this approach’s applicability. For instance, Marr et al. (2022) state that financial support from the federal government during the 2021 experimental projects improved the economic capacity of beneficiaries, cautioning these households from poverty. Parolin, Collyer, and Curran (2022, 1) also support this argument by providing evidence to prove the potential emerging from CYC’s expanded initiative by the Biden administration. The authors recognize that many families managed to meet their basic needs and empower themselves through economic generating activities, leading to their gradual rise from the poverty bracket. This change is transformative because it illustrates that the effects of CTC are widespread and go beyond meeting the children’s basic needs to improving the families’ economic status.
Statistics reveal that when the government raised the barriers for beneficiaries to reach as many children as possible in 2021, CTC benefited 61.2 million individuals below 17 years in the country. The authors indicate that over 36 million families benefited from the CTC. According to Hardy, Collyer, and Wimer (2023), poverty levels among children in the nation fell suddenly and significantly. The nationwide census bureau revealed that child poverty reached an all-time low of approximately 5.2%. Such a change was so momentous that it assisted over 3.7 million American children to stay away from poverty in December 2021 alone (Parolin, Collyer, and Curran 2022, 2). Without this assistance, these families would have been grappling with shortages of diverse materials, keeping the nation’s poverty levels comparatively higher. Trends reveal that child poverty in the U.S. before CTC expansion by the government was 15.8%, and it reduced to 11.9% within the first month’’ distributions. As a result, the impacts were immediate and measurable due to its effectiveness.
Immediately after the government rolled back the expanded CTC program, poverty rates worsened again in diverse communities in the U.S. For instance, Dress and Lane (2022) indicate that the expiry of the CTC reverted up to 3.7 million American children back to the poverty classification. Estimates reveal that the rates shot to 17% in January, up from 12.1% previously recorded in December. This change confirms that an expanded CTC was fundamental for cautioning families from severe financial crises during and after the pandemic. Projections by researchers such as Marr et al. (2022) had warned that without this expansion, a significant proportion of American families that the government was gradually pulling out of poverty remained vulnerable and may revert. Thus, CTC is fundamental for buffering these children and their families, explaining the urgency of embracing this expanded proposal.
While some critics may claim that providing financial support to families without income reduces employment, statistics from various studies disapprove of this observation. According to Roll, Hamilton, and Chun (2021), cash transfer initiatives like the CTC have a negligible effect on the perceptions of people toward employment. Marr et al. (2022) reveal that no meaningful employment effects would occur. For instance, the authors demonstrate that over 95% of the families denied full credit for past CTC conditions are working and would continue their employment even in an expanded CTC. Other estimates provided by the authors highlight that approximately 99% of parents would not abandon their work, irrespective of the changes in the CTC. Other external evidence further reveals that countries with expanded financial benefits for their low-income households, including the U.K., France, Germany, and Canada, continue to enjoy higher employment levels. As a result, the shift from employment due to cash transfer programs is unlikely.
Expanding the CTC offers an opportunity to fight against long-standing racial inequalities. Marr et al. (2022) indicate that up to 19 million kids under 17 years in America are barred from receiving CTC money from marginalized communities. The authors underline that historical injustices have disadvantaged these communities, including the African Americans, American Indians, Latinos, and others, through lowly paid jobs and diminished economic activities. As a result, their children are disproportionately affected by increased poverty. Without an expanded CTC, about 45% of African American children, 39% of Latinos, and 16% of Asian Americans cannot benefit from CTC because their families fail to satisfy the minimum criteria for full credit. However, Acs and Werner (2021) note that CTC expansion would increase benefits for these communities and half the number of needy children. For instance, it promises to reduce the poverty levels for African American children to 10%. Although this aspect would not eradicate the poverty rate variations along racial lines, it would minimize the extreme disparities. Thus, the argument is persuasive.
Evidence also reveals that expanding CTC has a meaningful impact on the psychological health of the beneficiary families. For instance, Batra, Jackson, and Hamad (2023, 79) confirm that expanded CTC’s benefits were impactful in mental health other than just beneficial for improving social mobility. The author indicates that past researchers have established a strong linkage between financial hardships and deteriorating mental health, especially among adults caring for children. According to Batra, Jackson, and Hamad (2023, 79), the experimental CTC in 2021 had widespread effects that reduced anxiety by up to 13,3 % among the beneficiaries. The benefits are even more impactful considering the regularity associated with CTC that enables the parents to strategize using these funds to temper social pressures and improve their status. Trends established in the United States communities demonstrate that the effects were significant at the population level, making this approach suitable and commendable.
Interestingly, the psychological health benefits were most significant among marginalized communities. Such an observation is consistent with Marr et al.’s (2022) arguments that CTC can play a critical role in addressing persistent social and health-related issues affecting these communities in the nation. Batra, Jackson, and Hamad (2023, 80) indicate that the structural marginalization suffered by Hispanic, African Americans, and other minority communities makes it challenging for them to withstand economic hardships, threatening their mental health. For instance, CTC is a recommendable approach for buffering these communities because of their ineligibility in various safety net programs in the U.S. because they cannot satisfy the basic requirements. Such discriminative policies pressure their well-being, leading to mental depression and anxiety. However, CTC has demonstrated its capacity to alleviate these symptoms.
Expanding the CTC and making it available to benefit as many low-income families as possible increases the probability of a country enjoying increased earnings in the long term. Goldin, Maag, and Michelmore (2021, 14) indicate that the children receiving benefits are more likely to succeed in life due to better education. This aspect increases their employability and improves earnings, affecting the nation’s tax revenue. The authors explore causal links established by various quasi-experimental studies and reveal that providing safety nets to families during an individual’s childhood has a higher number of transforming such individuals into higher earners in adulthood. As a result, although the government suffers immediate costs, it will enjoy better taxes in the future.
Researchers have also noted that the regularity of CTC may increase families’ comfort in acquiring unsecured debts and other credits. According to Hamilton et al. (2021, 7), households often rely on credit when their income fails to meet routine expenses or when faced with an emergency. As a result, receiving monthly CTC may minimize their over-reliance on credit or make it easy for them to repay immediately after disbursement. Such an aspect can also improve their credit score, determined by the capacity of a person to repay their loans on time. Equipping households with such financial power consistently improves their social well-being (Marr et al. 2022). Thus, the benefits of CTC are far-reaching and dynamic.
Opposing Evidence
One of the popular arguments against the CTC expansion is the projected impact on labor supply. Edelberg and Kearney (2023) recognize this concern as the leading evidence presented by opposers of this policy change. Corinth et al. (2021, 7) report that transforming CTC and expanding it or making it fully refundable will adversely impact work incentives in the nation. The authors indicate that families are motivated to re-enter employment when they have no passive and regular financial support from the government. As a result, projections reveal that low-income households are discouraged from finding i...