New Plan to Reduce Child Poverty in America

Children have the highest poverty rate of any age group in our country. Nearly 14.7 million of them — 19.9% — are officially poor, according to the latest Census report.

The percent is even higher for infants and toddlers, a new brief from the Center for American Progress tells us — nearly 23% or well over one in five. CAP has a four-part proposal to reduce the child poverty rate — and the depth of poverty for children who’d still be poor.

Unlike a plan I earlier blogged on, its parts all have to do with the Child Tax Credit. The first part, tucked into the brief as a starting point, is a permanent extension of the improvement the Recovery Act made. It’s now among the refundable tax credit improvements due to expire in 2017.

CAP’s plan would then do what some progressives advocated for the Recovery Act — drop the threshold for claiming the CTC to the first dollar of earned income, rather than the first dollar over $3,000.

At the same time, the plan would make the CTC fully refundable. In other words, a family would get a refund from the Internal Revenue Service for the entire amount its income tax liability fell short of the deductions and credits it claimed.

The credit now phases in to a maximum of $1,000 per child, leaving low-income parents with only a partial credit — or in some cases, no credit at all for a second or third child.

A third change would index the per child credit to inflation so that it didn’t lose value over time. Like the other two parts I’ve cited, linking the credit to the Consumer Price Index the IRS uses for tax provisions would make the CTC more like the Earned Income Tax Credit.

Now comes a part that CAP refers to as “enhancing” the CTC, but would actually be more like the child allowances many European countries (and a few others) provide. Families with children less than three years old would get $125 a month, regardless of income or how they net out at tax time.

They’d get this supplement monthly as a direct deposit to their bank account or on a debit card. So they’d have more to spend as they needed it to pay for the costs of caring for their babies and toddlers.

These costs can be very high. I’ve already said my bit about diapers. Full-time day care in a center for an infant cost, on average, more than $10,000 a year in half the states in 2013. And far from all poor and near-poor families can have their children’s daycare costs subsidized by either of the two main federal funding sources.

Rolling all the costs together, a CNN Money calculator tells us that a low-income family will have to pay, on average, an estimated $176,550 to raise a child born two years ago — $35,880 more if they live in an urban area in the northeast part of the country.

Now, CAP’s proposals would hardly supply parents with the wherewithal to pay for anything approaching this. Nor are they intended to. They wouldn’t eliminate child poverty either. They would, however, reduce it.

The overall poverty rate for children under seventeen would fall by 13.2%, CAP says. About 18% of children under three would be lifted out of poverty altogether — this, I assume, because of the extra income boost parents of children this young would get.

CAP also looks at the combined effects of its proposals on families with infants and toddlers who’d still have incomes (less any EITC refund and/or cash benefits) below the federal poverty line.

For them, it estimates how far its proposal would go toward closing the “poverty gap,” i.e., the difference between their average income and the FPL.

The gap would shrink by an estimated 26.1% nationwide, it reports. But, of course, the proposals would shrink the gap for all now-poor families with children — perhaps, in fact, lifting some of them above the FPL and, for sure, reducing the poverty gap for all.

The gap-closing effects of the proposals would vary considerably from state to state, a map supplement to the brief shows. They range from 25.4% in Hawaii to 12% in Wyoming. We who live in the District of Columbia could see a gap roughly 16.4% smaller.

CAP’s proposals would cost an estimated $29.2 billion if they were all in place this year. Somewhat more in the future, since the child tax credit would increase to keep pace with consumer price inflation.

This is hardly a big investment, even for spending through the tax code. So-called tax expenditures will cost the federal government about $1.22 trillion this year, the National Priorities Project reports.

Unlike many of the tax breaks, however, investments to reduce child poverty would pay for themselves many times over. An oft-cited study conducted in 2007 concluded that child poverty cost our country about half a trillion a year. Adjusting for inflation, CAP puts the total at more than $672 billion.

But this is a low-end estimate because the study included only the largest and mostly easily quantifiable costs, as the authors dutifully noted.

One doesn’t, I think, want our policies to hinge on dollars saved by alleviating the hardships and lifelong consequences of growing up in a family that’s so short on money as to be officially poor — or the hardships parents suffer to do the best they can for their children.

But if the return on investment would help CAP’s proposals gain support in a Congress that seems reluctant to even sustain the anti-poverty programs we’ve got, a strong talking point is ready to hand.

 

2 Responses to New Plan to Reduce Child Poverty in America

  1. Nudrat says:

    its good to hear that plans are being introduced to eliminate poverty🙂 wonder how effective these plans will be.

  2. Kathryn Baer says:

    These proposals have not been introduced as legislation. We should hope they will be.

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