The new child tax credit must be delivered monthly

Last month, President Biden signed into law the most significant piece of legislation in a generation, the American Rescue Plan. Included among funding for schools to reopen, increased numbers of vaccination sites and stimulus checks to help individuals make ends meet, was a quiet, but revolutionary proposal: an expanded child tax credit.

This revamped child tax credit takes a brand-new approach to supporting families by delivering monthly payments of up to $300 per child directly into parents’ bank accounts, through the end of 2021. It’s a significant change from the previous version of the policy, which was about half the amount, gave families the credit as a lump-sum in their annual tax refund and only included families with income. In short, this new child tax credit gets significantly more money to more families — especially those at the bottom — when they need it.

And the impact of the new child tax credit is projected to be nothing short of revolutionary. According to analysis from the Center on Poverty and Social Policy at Columbia University, this coupled with other measures included in Biden’s COVID-19 relief proposal could cut the child poverty rate in half. Two-thirds of families surveyed about the new expanded tax credit said they would use the funds to cover either food, housing or utility costs.

But in recent weeks, questions have been raised about whether the new child tax credit will be delivered monthly, as was intended in the legislation passed by Congress. The head of the IRS, Trump appointee Charles Rettig, told Congress that monthly payments “might be a challenge.” Some Republican senators who were originally backers of an expanded child tax credit have also argued against monthly payments.

Backing off the commitment to monthly payments would be a huge mistake. Most families do not have a savings cushion and they experience significant income swings. New data from the stimulus checks issued during the pandemic show that long lags in between payments to the lowest earners resulted in these families turning to credit cards and other high interest debt to make ends meet. Monthly payments are key because they enable households to weather swings in earnings — which disproportionately affect Black, Latinx and families with low incomes — and afford regular necessities like food and rent, without having to build up costly debt. 

Beyond reducing dependence on debt, regular payments have been shown to improve families’ health and wellbeing. One study of a pilot program that sent periodic direct cash payments to families in Chicago found that sending out Earned Income Tax Credit (EITC) payments regularly throughout the year, rather than just at tax time, significantly decreased the likelihood of the household experiencing food insecurity. Additionally, research just published on the Stockton Economic Empowerment Demonstration (SEED), which provided $500 a month to 125 low-income families in Stockton, Calif., for two years, showed that consistent direct cash assistance resulted in improved physical and mental health, more (and better) full-time employment and increased financial stability. 

For parents, monthly payments are a no-brainer. In recent surveys of parents in Utah and Florida, two states where senators have actively opposed the child tax credit in the form of monthly payments, two-thirds of parents said the monthly nature of the payments were “very important.” Only around 14 percent of parents surveyed said it didn’t matter if the payments came monthly versus once a year.

Brianna Jackman, a mom in Utah with two kids on the Autism spectrum, said that the monthly payments would be a huge deal. “We literally live paycheck to paycheck each month. And there are months when we go through our budget and go, ‘OK, what do we desperately need and what can we cut out?’” She told ParentsTogether, where one of us serves as co-director that, “having that little extra cash would help out immensely, like putting gas in the car to run the kids to doctors appointments or take them to school.”

In passing the American Rescue Plan, Biden and Congress have set in motion one of the biggest changes to our nation’s social safety net in decades. But to truly make sure families like Brianna’s see the full benefits of the new child tax credit, they must receive the payments monthly. 

If necessary, Congress and Biden must hold the IRS’s feet to the fire in order to get it done. It will be a huge first step towards making sure every family in our country has what it needs to thrive.

Bethany Robertson is the co-director of ParentsTogether. Adam Ruben is the campaigns director of the Economic Security Project.