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Tax Credits: A Crucial Weapon in the Fight Against Child Poverty

March 22, 2017

This was originally posted at Spotlight On Poverty

If a topic like comprehensive tax reform could ever be the rage in Washington, now would be the moment. President Trump has pledged to deliver “big league” changes to taxes, particularly cutting corporate taxes. Standing room-only sessions on Capitol Hill have debated the previously obscure proposal for a ‘border-adjusted’ tax to boost American jobs.

But at least one crucial group has been left out of these discussions: children in poverty. And that’s a big deal. The tax code has become the primary way our nation boosts the incomes of low-income families.

The Child Tax Credit is worth up to $1,000 per child, and because it is partially refundable, even families who do not owe any taxes can get money back from the government. The Child Tax Credit works in tandem with the Earned Income Tax Credit (which provides a credit of as much as $5,548 to working families with two children). Together these credits for working families lifted 5.1 million children out of poverty in 2014. Families now receive more aid from these tax credits than they receive from welfare or food stamps.

New evidence indicates just how important these family tax credits are to combatting poverty. Rigorous research has found that these relatively modest amounts of cash lead to long-term benefits, starting with lower incidence of low birth weight, and continuing with increasing test scores in elementary and middle school, and higher graduation rates from high school. Part of the impact comes from the ability of tax credits to reduce family stress that can be literally toxic to the vulnerable and fast developing bodies of young children, in addition to allowing families to afford child rearing essentials like child care and diapers.

Tax reform should be a moment to build on the successes of family tax credits in protecting our most important investment in the nation’s future. Towards that end, a recently released report by the The Child Poverty Action Group USA provides an important blueprint for the next generation of family tax policy.

For example, a Young Child Tax Credit would address the sky-high expenses of early childhood including diapers and infant child care (which averages 40 percent of the median income of single mothers). Making all (or a larger share) of the credits refundable would dramatically increase the number of families lifted out of poverty. Increasing the limit on child care expenses (currently $3,000) eligible for the child care and development tax credit would align this credit with the reality of the skyrocketing costs of child care. The federal tax code could be revised to provide incentives for low-income families with children to save for college, or simply for a rainy day.

The beauty of tax credits is that they can win support from conservatives concerned about the tax burden on families and who want to provide additional support to families with stay-at-home parents who don’t benefit from other forms of government support. Recent major tax legislation like the Bush Tax Cuts of 2001 and the Bipartisan Budget Act passed in 2015 included expansions of family tax credits. But, family tax credits could be easily left out this time. Republicans opting to use the simple majority procedure called reconciliation won’t need Democratic votes, and will have less pressure to engage on what is perceived as a Democratic issue.

In fact, tax reform in 2017 could worsen the situation. Pressure to simplify the tax code could result in repealing current deductions and credits to fund a lower across-the-board tax rate. This could reduce the after-tax income of families with children living in poverty. The last major blueprint for tax reform, introduced in 2014 by Rep. Dave Camp (R-MI), did just that—reducing the Earned Income Credit for families with more than one child and eliminating the child care and dependent tax credit.

Ivanka Trump has called significant attention to child care. But some of the proposals floated during the presidential campaign – like giving taxpayers the ability to deduct child care income from their taxes –would direct a lion’s share of new money to middle income kids not the poor. And, adding to the anxiety of child advocates, tax reform will be moving forward along with a budget that could include debilitating cuts to health insurance, child care, and energy assistance.

Whatever happens in 2017, family tax credits have more than proven their worth fighting poverty in America. But we still have only scratched the surface as a nation as to what tax policy can do to boost the futures of children at risk. Moving towards the right family tax policy will require sustained engagement by child advocates in the foreign territory of tax debate, a focus on highlighting the dangers of policies that worsen the finances of poor families, and the continued push for strengthening key tax credits in this Congress and beyond.

Andrew Stettner is a senior fellow at The Century Foundation, which is a member of the Child Poverty Action Group


Using Tax Reform to Lift Children Out of Poverty

For Immediate Release: March 14, 2017

Contact: Meg Biallas, 202.657.0664

megb@firstfocus.org  

(WASHINGTON, D.C.) – A powerful coalition today released a paper that offers lawmakers a blueprint for using tax reform to improve the standard of living for children in the United States. At a time when nearly half the nation’s children – and more than three in five children of color – live in poor or low-income households, the paper is both a stirring call to action and a roadmap to help Congress use tax reform to address this problem, which stifles America’s growth and prosperity.

Produced by the U.S. Child Poverty Action Group, “Family Tax Policy: A Path Forward to Lifting Children Out of Poverty” notes that the federal tax code is one of the most powerful tools available to combat child poverty. When coupled with safety net programs, family tax credits have the ability to lift children out of poverty, bolster our economy, and create brighter futures for children and families. Just four federal tax policies – the Earned Income Tax Credit, the Child Tax Credit, the dependent exemption and children’s share of the tax exclusion for employer-sponsored health insurance – account for nearly 40 percent of federal investments in children, it says. But, the paper warns, these important credits, exemptions and exclusions may be at risk as policymakers debate a comprehensive overhaul of the tax code. 

“Century Foundation research indicates that the existing child tax credit is one of the most effective ways to reduce child poverty, but policy makers can do more to support children in need,” said Andrew Stettner, senior fellow at The Century Foundation. “Data shows that strengthening the child tax credit would deliver the most significant improvements for America's youngest children, those aged 0 - 6 years old, and those born into very poor families. The evidence is clear - public policy matters when it comes to reducing child poverty in cities and states across America.”

“Low-income families are working hard – but the upside down tax code isn’t working hard enough for them,” said Andrea Levere, president of the Corporation for Enterprise Development (CFED). “Congress can and should build on proven tools in the tax code so they more effectively help families build wealth and save for a prosperous future for their children.”

“If Congress truly cares about tackling child poverty, they should strongly consider the tax code recommendations in this paper,” said Bruce Lesley, president of the First Focus. “The revisions outlined should be a wake-up call to Congress that there are sensible, reasonable solutions that are effective at ending child poverty. With 43% of American children in poor or low-income households, increasing a family’s cash income is critical for a family’s economic security – and our nation. We urge Congress to take these recommendations seriously.”

“As lawmakers reform our tax system, the well-being of children should be their primary concern, particularly children in the most vulnerable communities: Black, Latinx, Asian, Native American, LGBTQ+, and low-income families. Failing to invest in children hurts our economy,” said Kristin Rowe-Finkbeiner, CEO and executive director of MomsRising, an online and on-the-ground organization of more than 1 million mothers and their families. “Tens of thousands of our members – moms and dads across the country – have spoken out to strengthen the Earned Income Tax Credit, the Child Tax Credit and the Child and Dependent Care Tax Credit because these policies support children and families and significantly boost our economy. It is shameful that so many children are growing up in poverty. We need to be smart about tax reform in order to change that.”

“Too many of our nation’s children are at a disadvantage from the time they are born. We must do more to help lift these families out of poverty,” said Mark Shriver, president of Save the Children Action Network (SCAN). “We believe investing in high-quality early childhood education is the most effective way to break the cycle of poverty and to ensure equal opportunity for all Americans. What’s missing is the political will to make the necessary choices and pay for programs that work. SCAN is proud to work with the Children’s Poverty Action Group to provide our nation’s leaders with innovative options to help make sure all kids are given a strong start in life.”

The paper urges policymakers to protect existing tax-based policies that help improve the standard of living for children, as well as to make improvements that will better support families in their pursuit of economic mobility. It cautions that eliminating nearly all credits, deductions and exclusions (sometimes called loopholes) from the tax code in favor of lower marginal tax rates – as many suggest – could wipe out some tax code provisions that help low-income families, those living in poverty and families with young children.

Family Tax Policy: A Path Forward to Lifting Children Out of Poverty” looks in depth at tax credits; tax deductions; child savings accounts and asset building; and other tax policies to consider what would benefit children and families. It offers a range of possible solutions and fixes to existing policy that would help ensure the tax system benefits families with children at all income levels. The U.S. Child Poverty Action Group will distribute it to every member of Congress and Trump administration officials.  

The U.S. Child Poverty Action Group aims to ensure the federal tax policies helping families and children are not only protected in the tax code during the comprehensive tax reform debate in the 115th Congress, but are strengthened to better serve poor and low-income children and families, in particular.  The members that produced the new paper are the Corporation for Enterprise Development (CFED), First Focus Campaign for Children, MomsRising, National Association for the Education of Young Children and Save the Children Action Network (SCAN). The Century Foundation provided research assistance on the child tax credit.

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The U.S. Child Poverty Action Group (CPAG USA) is a broad-based coalition of non-profit, child-focused organizations and individuals dedicated to cutting the child poverty rate in half within 10 years. For more information, follow CPAG on Twitter @CPAG_USA or visit www.childpovertyusa.org


Advocates Call on New Administration to Set a Child Poverty Target in 2017

 For Immediate Release: Thursday, December 22, 2016

Contact: Meg Biallas, (202) 657-0664

megb@firstfocus.org

(WASHINGTON, D.C.) A coalition of child advocates is calling on the incoming Trump Administration to create a national Child Poverty Target, setting the goal of cutting the U.S. child poverty rate by half within a decade.

A national Child Poverty Target is not unprecedented – the United Kingdom established a national target, which was supported by both the Conservative and Labour parties. Measured in U.S. terms, the UK’s Child Poverty Target and resulting policy changes successfully cut the UK’s absolute child poverty rate by 50 percent during the effort’s first decade. 

Members of the U.S. Child Poverty Action Group recognize that establishing a national target in the U.S. would create an impetus to drive policies that reduce child poverty by supporting a family’s financial well-being and stability, such as: 

  • Strengthening tax credits for families, such as the Earned Income Tax Credit and Child Tax Credit.
  • Increasing access to affordable childcare and early learning programs, to better prepare all children for school and support parents’ ability to maintain stable employment.
  • Offering earned family and medical leave and sick days to all workers, to create flexibility for parents to balance obligations at home and at work.
  • Supporting home visiting programs that have been shown to support families and reduce maltreatment of children.
  • Boosting access to affordable housing and addressing family homelessness by pairing housing assistance with services to help children and parents recover from the disruption of homelessness.
  • Investing in communities to address concentrated poverty and boost positive outcomes for children later in life.

“We are asking President-elect Trump’s policy advisers to consider solutions that truly work for kids, families and communities,” said Bruce Lesley, president of First Focus Campaign for Children. “If we want to make America great, we must tackle child poverty and invest in our nation’s future – our children.” 

“There are more than 4 million children under the age of 5 living in poverty in the United States. That’s one out of every five infants, toddlers, and preschoolers. Investing in high-quality early childhood education is the most effective way to break the cycle of poverty and ensure equal opportunity for all American families,” said Mark Shriver, president of Save the Children Action Network, or SCAN. “SCAN is committed to working with the Children’s Poverty Action Group to ensure that all children have access to the support they need, especially high-quality early childhood education, during these critical early years.”

"We know that poverty has a significant impact on child development and that it does increase the many stresses on our most vulnerable families including those in the child welfare population,” said John Sciamanna, Vice President of Public Policy, Child Welfare League of America. “Any strategy to move this country forward must address child poverty equal to our greatest challenges."

Members of the U.S. Child Poverty Action Group who have endorsed these recommendations include: First Focus Campaign for Children, Save the Children Action Network, National Center for Children in Poverty, National Black Child Development Institute, American Federation of Teachers, Child Welfare League of America, National Council of La Raza, and PICO National Network.  

Click here to read the full letter of recommendations.

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The U.S. Child Poverty Action Group (CPAG USA) is a broad-based coalition of non-profit, child-focused organizations and individuals dedicated to cutting the child poverty rate in half within 10 years. For more information, follow CPAG on Twitter @CPAG_USA or visit www.childpovertyusa.org

 


3 TVs and No Food: Growing Up Poor in America

New York Times, 10/26/16

By Nicholas Kristof

PINE BLUFF, Ark. — Here’s the kind of person whom America’s presidential candidates just don’t talk about: a sweet, grinning, endangered 13-year-old boy named Emanuel Laster.

Emanuel has three televisions in his room, two of them gargantuan large-screen models. But there is no food in the house. As for the TVs, at least one doesn’t work, and the electricity was supposed to be cut off for nonpayment on the day I visited his house here in Pine Bluff: Emanuel’s mother deployed her pit bull terrier in the yard in hopes of deterring the utility man. (This seemed to work.)

[Read More]

Related: Tackling Child Poverty and Improving Child Well-Being: Lessons from Britain (Source: First Focus) 


Lawmakers: Make TANF Work for Children

Youth Today, 9/21/16

By Cara Baldari and John Sciamanna


The verdict is out: 20 years later, the only federal cash assistance program for low-income families desperately needs an overhaul.
In 1996, the Temporary Assistance for Needy Families (TANF) program was enacted — a historic welfare reform initiative whose core values have since gone askew. States have overwhelmingly used TANF funds for everything except its original intent: reducing child poverty and getting families back to work.


Under the program’s constricting work and time-limit requirements, just under 25 percent of all poor families with children receive cash assistance today. States have placed such harsh restrictions on benefits that families can’t access the help they need and can’t escape the cycle of poverty.


If reformed properly, TANF can still work. Studies show that when families receive a boost in income, it promotes their children’s healthy development and increases their chance of future success. Lawmakers must make this a priority and put children front and center in any future TANF reform.


Here are some ways Congress can improve TANF to directly impact child poverty. [Read More...]
 


Lack of Progress on Child Poverty Reduction Prompts the Formation of New National Coalition

Washington Amid alarming new Census data showing that nearly one in five children live below the federal poverty line, a coalition of national and state broad-based, child-focused organizations, has formed the U.S. Child Poverty Action Group (CPAG), a similar iteration of a group that successfully lobbied for policies that cut child poverty by half in the United Kingdom in 2009.

The 2015 data on income and poverty released by the U.S. Census Bureau today is a stark reminder that 14.5 million children are suffering from the effects of poverty. While anti-poverty programs have helped lift millions of children out of poverty, more must be done to give children a fair shot to succeed.

"We know more than we ever did about the devastating costs of child poverty to children's well-being and the nation's future,” said Jeff Madrick, director of the Bernard L. Schwartz Rediscovering Government Initiative at The Century Foundation, a CPAG member. “It's time for a truly aggressive national crusade against this grave threat to America--and that's why the launch of the Child Poverty Action group is so important.”

Despite some progress, the new poverty data paints a bleak landscape for children. Minority and young children, specifically, continue to experience higher rates of poverty than other age groups in our society. Children make up 23.1 percent of the U.S. population, but account for 33.6 percent of the population living in poverty. Children are 69 percent more likely to live in poverty than adults.

“It’s clear that meaningful and targeted action to reduce child poverty is badly needed in this country,” said Bruce Lesley, president of First Focus, a CPAG member. “Lawmakers must stop ignoring poverty and act in the best interest of America’s children.”

Some figures to note from the latest Census data:

  •   32.9 percent of Black children, and 28.9 percent of Hispanic children live in poverty, compared with 12.1 percent of white children who live in poverty

  •  21 percent of children under age 6 live in poverty

  • 8.9 percent of children live in deep poverty (below 50 percent of the poverty threshold)

To ensure that child poverty reduction is prioritized in Congress and the next administration, CPAG will advocate for the adoption of a National Child Poverty Target to guide future budget and legislative decisions. Through the establishment of a child poverty target, the UK cut its own child poverty rate (measured in U.S. terms) by 50 percent during the effort’s first decade (1999-2009). By contrast, the U.S. child poverty rate increased by nearly 18 percent, from 16.2 percent in 2000 to 19.7 percent in 2015.

"Every child deserves a strong start in life,” said John Bouman, president of the Sargent Shriver National Center on Poverty Law, a CPAG member. “Action by the states is essential to reducing child poverty, and there has been progress in many states. The federal government must do more to incentivize, reward, and resource the states so that this progress can continue and expand."

CPAG members believe that by making targeted investments in children, measures to make work pay, and efforts to increase financial support for families, the U.S. can achieve the same success as its neighbors in the UK. This includes a combination of short- and long-term policies that focus on education, benefits programs, workforce development, health, and taxes. For the target to be effective, there must be bipartisan consensus to put children first in broader economic policy decisions.

“Considering what’s at stake here, surely, it’s possible to find common ground on the vitally important goal of child poverty reduction and achieve support across party lines,” said Renée Wilson-Simmons, director of the National Center for Children in Poverty at Columbia University Mailman School of Public Health, a CPAG member. “Although bipartisanship has sometimes been criticized for obscuring the differences between political parties, such condemnation cannot hold true when it comes to reducing poverty and improving the health, wellbeing, and life outcomes of our nation’s next generation of adults.” 

Inaugural CPAG members include:

  • American Federation of Teachers

  • PICO National Network

  • The Century Foundation

  •  National Council of La Raza

  •  National Center for Children in Poverty

  • The Center for Native American Youth

  • Sargent Shriver National Center on Poverty Law

  • Child Welfare League of America

  • Corporation for Enterprise Development

  •  MomsRising

  •  Inclusion.US

Click here for a more detailed analysis of the newly released 2015 census data.

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The U.S. Child Poverty Action Group (CPAG USA) is a broad-based coalition of non-profit, child-focused organizations and individuals dedicated to cutting the child poverty rate in half within 10 years. For more information, follow CPAG on Twitter @CPAG_USA or visit www.childpovertyusa.org