The enhanced Child Tax Credit has expired and I, for one, will not mourn it. Neither should you.

Sure, it’s been extremely popular — who doesn’t like getting more money from the government? But it’s not great policy. Taxpayers and recipients of the credit deserve better.

Here’s a quick review: The enhanced tax credit was a successor to the $2,000 version that was part of the 2017 tax reform. The credit was increased last year by the Joe Biden administration to $3,600 annually for each child under 6 and $3,000 for older children, with half of that paid monthly and the rest claimed on your tax return. Every family got the same amount up to an income limit. The pandemic-inspired enhancement was set to expire at the end of 2021, when the credit reverted to the prior $2,000. The president’s Build Back Better plan would extend the increase, but that proposal is in limbo as the bill remains blocked by opponents in Congress.

Since the expiration of the enhanced credit means families will lose money relative to last year, some economists and pundits are arguing that the program should be preserved, since it was a great success in achieving its goal of reducing child poverty. Don’t believe the hype.

The enhanced CTC may have had intentions, but it’s not entirely clear what they were. Based on the timing and communication from the White House it aimed to reduce child poverty and provide relief to families during the pandemic. The pandemic justification never made much sense. Between the economic impact payments, enhanced unemployment benefits, eviction moratorium and pause in student loan payments, most families weren’t financially much worse off than they were before the pandemic. So presumably the enhanced CTC was supposed to meet the larger, pre-existing goal of reducing child poverty while offering relief to cash-strapped middle-class families. And who can argue with those goals?

The case for a permanently larger middle-class entitlement isn’t as strong. Maybe the U.S. should have a big entitlement state for working middle- and upper-middle-class families. But this is not a cheap program, and it represents a big change in American welfare, which has traditionally targeted the poor, disabled and elderly.

The enhanced CTC costs more than $100 billion a year, and $1.6 trillion over the next 10 years if made permanent — more than is spent on food stamps, income support for low earners and housing assistance. Essentially, the larger credit means choosing either less money for other programs or European-sized taxes. Maybe that’s our future, but there are trade-offs in terms of the expense and a less efficient economy.

The case for trying to reduce child poverty is easier to make. Before the pandemic, about 14 percent of American children lived in poverty, compared to 12.8 percent of children in other OECD countries. That’s shameful for the world’s richest country. And as proponents of the new CTC point out, it did reduce poverty. Estimates put the reduction of child poverty at about 34 percent, and it may have reduced food insufficiency by 27 percent. This isn’t surprising; if you send lots of families checks they will have more money.

But the reduction in poverty doesn’t necessarily mean this is a good policy. First of all, the pandemic is still raging. We really don’t know how the enhanced CTC works in normal times and in a normal labor market. For example, many poor children didn’t get regular schooling, which is a source of food from the free lunch program. And perhaps child poverty could be reduced in other, better ways that cost the taxpayer less money.

By these standards the enhanced CTC falls short. By one estimate only 57 percent of households earning less than $25,000 even got the credit because it is administered by the IRS and very low earners or no earners don’t always file. The enhanced CTC aims to reduce poverty, but compared to other government programs a smaller fraction of the money goes to low-income people. This is because of the substantial benefits paid to middle and upper middle-class earners.

It’s sometimes argued that it’s necessary to offer the credit to higher earners because if you take benefits away as people earn more it discourages advancement. But the current version of the CTC also has harmful distortions. The 2017 CTC created incentives to work by increasing the size of the credit as income rose (up to $30,000 in earnings). Taking away this feature and offering a flat credit (within a higher income limit), reduces the return-to-work benefit (the money you’d get from working compared to not working).

For some people, the return to working has fallen substantially. Economists estimate that the reduction is on par with eliminating the Earned Income Tax Credit, a federal subsidy that increases the return to work because an income is required for eligibility. If we believe the EITC has been successful at getting people to work (and most economists do), it stands to reason the enhanced CTC must discourage it. The economists estimate that as the economy returns to normal, the reduction in work could undo the improvement to deep poverty that the credit provided during the pandemic.

The enhanced CTC may have good intentions of reducing child poverty, but creating a large middle-class entitlement state and undermining work incentives is not good policy — aside from the expense to taxpayers. There are better, more targeted alternatives, such as reforming welfare.

Policy needs to be judged on its execution, not just on its intent. This is a problem shared by many programs in Build Back Better. Just because a policy has good intentions, whether it’s more affordable childcare or less poverty, that doesn’t mean it’s a good policy. How well it actually solves the problem is what matters most.

Allison Schrager is a Bloomberg Opinion columnist. She is a senior fellow at the Manhattan Institute and author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.”

(18) comments

MD1756

Some observations: In 2000 the county had a population of 195,277 Demographics were 88.1% white alone, 7% Black, 2.1% Asian, 2.4% Hispanic. In 2000, 12% of the students in FCPS were in the FARMs program. In 2010 the county had 233,385 people: 77.8% were white alone, 8.6% Black, 3.8% Asian, 7.3% Hispanic. In 2010, 22% of the students were in the FARMs program. In 2018, 71.6 were White alone, 9.89% Black, 4.1% were Asian, 3% muti-racial non Hispanic, 10% Hispanic (any race). In 2018, 27.2% of the students were in the FARMs program. As one can see, the percent of children in the Farms program is increasing over time. It would be nice is some governmental organization would look at all the data to really determine what is behind the trends, however, one thing is clear ... This is not the result of just a few families falling on unexpected hard times that are almost impossible to plan for (i.e. serious childhood illness) but more likely is the result of poor planning by those having children without determining how they will provide for those children. Add that problem on top of the fact that the growing human population is having serious adverse impacts on the planet and other species and it clearly shows while we need to protect the children, we need to end policies that promote population growth and start holding people accountable for putting their own children at risk. Maybe requirements that people with children purchase minimum amount of various insurances (life insurance, insurance against divorces, illnesses (something like Aflack), etc.). Additionally aid that is given must not be cash but must be direct benefits to the children (don't give the parents the opportunity to misspend the benefits we all pay for).

Too many people on this site (and I think in general) only consider the economics and they can only come up with the solution that we need to grow the population to continue a strong economy and that is just false and completely discounts the adverse impacts of a growing population. Increases in productivity and efficiencies can overcome any decreases that come with a decreasing population and if the population remained stable there would be no need to grow the economy.

gary4books

I usually mention the economy first when discussing population decline because most people are focused on the economy and that is where it shows up first - a leading indicator. If you want to see the rest of the picture, consider Japan and some countries in Europe. That will show what a declining population can do. Even China may face that problem. And they have changed policy for that reason. It is a question to consider for future planning.

MD1756

We humans have survived downturns in the economy many times before. Other species are having a hard time surviving us and our growth.

Boomer631B

The Child Tax Credit they wanted to extend never went to the real needy because most of them below the $25K level never filed tax returns and based on that were not getting the tax credit. At the same time, folks making as much as 400K a year were getting that credit... now why would you want that to continue as it was documented within the BBB... if you truly wanted to help children; then you the Biden Administration with a stroke of the pen could easily make that happen without all this BS about BBB... or better yet work with the republicans and write a bill that only addresses the child credit issue and make it what it should be without adding riders to it. They hate that idea because it was and still is smoke and mirrors with the BBB... all about the children but really it is about the other hidden agenda items that really cost the money and further establishes socialism.

pdl603

I won’t be surprised if Bare Shelves Biden rolls out a 5000 dollar child tax credit to save his sinking poll numbers and to buy new voters. Funny how this rag doesn’t highlight Bungling Joementia’s failures. There are plenty of examples out there. I guess the FNP got the message from The Party.

WhiskeyTangoFoxtrot

Think of the old adage - If you want more of something, subsidize it. If you want less of something, tax it.

gary4books

Our economy needs healthy and well-educated workers. Our Nation needs healthy and well-adjusted adults. All of this depends on children who receive good nutrition and health care as they grow. Money spent on children to ensure their development will save much on reductions in expenses later on in life. It is money well spent. Other nations do it. Why not the USA?

francesca_easa

Gary, I share your will to see children succeed. But as the author of this article has indicated, families received stimulus checks that they had not been given before (extra money if they had underaged kids). Governments offered extended and extra unemployment money. Free laptops and breakfasts, lunches and weekend meals were given to school children in the last two years. I witnessed several nonprofits giving away free toys, games, clothing in the neighborhood park all throughout 2020. There are many churches doing great deeds for those in need (including free food, medicines, etc). Where do you draw the line? Wouldn't creating jobs be more effective and instilling a work ethic? How about individual responsibility and self-reliance too?

Hayduke2

francesca - the problem with OPINION pieces like this is that it can be misleading. From the latest census - The official poverty rate in 2020 was 11.4 percent, up 1.0 percentage point from 10.5 percent in 2019. This is the first increase in poverty after five consecutive annual declines (Figure 8 and Table B-4).

In 2020, there were 37.2 million people in poverty, approximately 3.3 million more than in 2019 (Figure 8 and Table B-1). Think about that, that is the overall incease. See https://www.census.gov/library/publications/2021/demo/p60-273.html for more facts about poverty. Your claims are isolated examples and by no means universal programs. Please stop the myth about individual responsibility and self-reliance missing from those in poverty.

gary4books

Good points to consider. However, so many families are living "paycheck to paycheck" and a reasonable amount of assistance could make all the difference between a family with enough and one that is under constant stress to feed and stay warm. A child will do much better if they live in a happy home. This may help to make that possible for many in the USA.

WhiskeyTangoFoxtrot

francesca..... it's also a matter of perceived value. Give a kid a bicycle and he will not value it as much as one he/she saves for and buys on their own. The best education you can give a child is to start them on an allowance in exchange for doing a few chores. Encourage them to save that money for something they want and let them buy it for themselves. They will learn the lesson of working and saving for what is really important. Teaching people to depend on the government to house, feed, and clothe them is a great disservice.

Boomer631B

Those programs are in place, children are not going hungry and especially their education programs are also in place. With all the money that was provided extra because of the "pandemic" the states got bailed out by the Federal Government and why are most blue states still sitting on lots of federal money they have not spent? Same with counties of states that got the money and have not spent it yet? Why is that? Think also for decades both at the federal and state levels in most states not all but most; $$$$ was delivered to the big cities to rebuild their education systems and their support systems for children and struggling families. It is shameful to keep claiming the "poor children" when in reality as seen yesterday with the indictment of Mosby in Baltimore just how much corruption there is and sometimes where the $$$$ goes.... and yes it is shameful that we keep crying the poor children and the favorite line of racism.

Hayduke2

Once again you make stuff up. Take a look at which states haven't used their Covid money - https://bangordailynews.com/2021/12/26/national-politics/states-have-billions-of-federal-covid-relief-aid-to-spend-some-havent-spent-a-dollar/ Notice that the big 8 are Republican led and among the poorest in the nation. Wonder why that is? As far as the Mosby case, yep, there are scammers on both sides of the aisle and they can be found in any occupation but that has nothing to do with this conversation. Get real.

Boomer631B

Those 8 states have not yet budgeted that money for use and for most of them their economies have been pretty good without taking that money that was allocated to them... most blue states have budgeted their funds and still not used it all yet... so depending on what link and reference you use for your research not all the details are what they seem to be... and yes I am sure some children are going hungry but not because we did not extend the child tax credit gimmick either... need to look at their parental situation and where they allocate their money and believe me as others stated many opportunities out there to make sure no one goes hungry... sad that you can be that sad too!

Hayduke2

Spin it bro!

Hayduke2

Tim says " children are not going hungry" Look up hunger in children, research it and then tell me how you can make this generalization. Sad.

Boomer631B

False statement - I said kids are not going hungry because the child tax credit was not extended; they could be going hungry if there parents/guardians are not doing the right thing though!

Hayduke2

Words from your post Boomer - Those programs are in place, children are not going hungry .... Try and walk it back bro, typical politician like response.....

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