Sen. Joe Manchin (D-WV) opposes parts of President Biden’s signature Build Back Better Act, especially the expanded Child Tax Credit (CTC) payments. Yet, those payments, which started in July 2021 as part of the American Rescue Plan, have proven crucial for families to pay their bills. Without action, the payments are on track to expire this month. Extending this provision would have helped many families, particularly those in West Virginia, to maintain some measure of financial security as a new wave of omicron-fueled disruptions looms on the horizon.
The American Rescue Plan, enacted in in March 2021, contained a provision to expand CTC payments to families with children. The new law increased the amount of the CTC for each child, depending on the child’s age, and gave people the option to receive half of their estimated CTC payments for the 2021 tax year in advance, rather than waiting until tax time. The amount of the CTC phases out with higher incomes, starting at $75,000 for single filers and at $150,000 for those married and filing joint tax returns.
This is best explained with an example. Assume a married couple with an adjusted gross income of $80,000 and two children under the age of six. Right now, they receive a combined CTC of $7,200 for 2021 rather than the $4,000 they would have received without the American Rescue Plan.. Moreover, they can receive half of their estimated CTC payments for 2021 as advance payments. In this example, this would mean monthly payments of $600. This is $3,600 – half of $7,200 – spread out over six months from July to December 2021.
Families have used these payments primarily to pay for bare necessities. The Census Bureau has collected information about the CTC in its Household Pulse Survey since the summer of 2021. People who answered that they had received advance CTC payments were asked how they used that money. Answers include food, clothing, rent, mortgages, utilities, childcare, education and donations, among other items. They could indicate more than one use of the money, recognizing that people face multiple financial demands. Yet, food, clothing and housing – rent, mortgages and utilities – were by far the most important items. From July to October 2021, 59.1% of CTC recipients used the money to pay for food and clothing. Two-in-five recipients, 40.9%, used the money for housing and 36.9% for school and childcare (see figure below). In contrast, only a tiny sliver (3.9%) bought recreational goods – think basketballs or fishing rods – with their CTC money (see figure below).
Food, Clothing and Housing Primary Uses of CTC Payments
Calculations Based on Census, Household Pulse Survey
The other uses such as paying down debt and saving are not exactly financially reckless moves. This is especially true with uncertainty about when we will finally be done with the pandemic and its economic consequences. Building a tiny financial cushion while the sun is shining is a really smart move for families to create financial resilience.
The balance tips even more towards daily necessities among families with incomes below $35,000 per year. Almost three-quarters, 73.2% of those families spent their CTC payments on food and clothing and 64.6% on housing (see figure above). The expanded CTC payments proved especially important for exactly those families that have struggled the most before and during the pandemic.
The CTC payments have been crucial for families in West Virginia, who have been more likely to use the money for food, clothing and housing than is the case for families in the US as a whole. For example, almost two-thirds, 65.7%, of CTC recipients in West Virginia used the money for food or clothing from July to October 2021, compared to 59.1% for the country as a whole. And, 48.4% of West Virginia CTC recipients used part or all of the money for housing, while 40.9% in the US did (see figure below).
Families in West Virginia More Likely to Use CTC Checks for Necessities
Calculations Based on Census, Household Pulse Survey
Families across the country are struggling with the consequences of a once-in-a-century pandemic. This is especially true for lower-income families in parts of the country that have been left behind in terms of income and wealth gains over the past few decades. In these places, including West Virginia, the expanded Child Tax Credit payments have been important in helping people make ends meet. Many of these families will now fall over a financial cliff since the senate could not pass legislation to extend those payments into 2022.