In the last six months, 36 million families received a monthly check from the IRS through the expanded Child Tax Credit – a cash infusion that helped pay for groceries, buy school uniforms and ease the cost of raising children. But now families are facing the first month since July without a check from the government program, even as inflationand cases are rising.
If President Joe Biden’s Build Back Better Act had been passed, families would have received a CTC payment on January 14 (because the 15th is a Saturday, the IRS would have issued checks on the previous business day.) But that bill remains in limbo , which means parents do not get a check on Friday.
“CTC disappeared, but grocery prices have not fallen,” said Stormy Johnson, 44, a single mother of three in Kingwood, West Virginia, who works as a student aid specialist. “Now that I do not have that payment, the reality of life is that there will be times when I will not eat to make sure my kids can.”
Johnson, 44, said the loss of payments means more stress for the whole family as her children are aware she will skip meals to make sure they have enough food. She brings home about $ 2,200 a month after tax, with $ 1,600 earmarked for rent, her car payments and car insurance. After paying for other bills such as utilities, she is left with $ 50 a month.
The $ 500 in CTC funds she received for her two youngest children “was a huge help,” said Johnson, who also has a 21-year-old child who was too old to qualify for the program. “The payment they take away has just hurt a lot of people a lot.”
10 million children at risk of poverty
There are plenty of working families like Johnsons who live close to the financial edge despite being employed. Parents interviewed by CBS MoneyWatch said they plan to cut back on essential things like food as well as expenses such as cable TV to try to cope with the double tumult of inflation on top of the expired benefit. Many worried about the consequences for their children.
Poverty reduction experts say the impact on children can be extreme. Without the continuation of the monthly payments, about 10 million children are at risk of slipping into poverty, according to a recent estimate from the Center for Budget and Policy Priorities (CBPP).
The extended CTC expired on December 31, thenamid opposition from Senator Joe Manchin, a West Virginia Democrat whose support is crucial to the passage of the bill in a divided U.S. Senate. Although Speaker Nancy Pelosi said on Sunday that she with Manchin, it would not be time for families to receive payments this week.
It is also unclear whether the CTC will move forward in its expanded form even if Build Back Better is revived. Wall Street analysts are first of all skeptical that lawmakers will renew the expanded program, with Goldman Sachs calling a full extension “highly unlikely.”
“A return to policy before 2021 looks most likely, although a much more modest expansion is still possible,” investment bank analysts said in a report on Monday.
Expenses for children
Nine out of 10 families earning an annual salary of less than $ 36,000 spent their monthly Child Tax Credit payments on essential items, according to CBPP research. The top three categories of spending were food, utilities, and rent or mortgage payments, the left-leaning think tank noted.
Among them is Melissa Boyles, 63, who is caring for her 16-year-old granddaughter whose parents have passed away. With the extra $ 250 a month, Boyles was able to purchase extras like a $ 36 rose and a type of pasta that her granddaughter liked, as well as new clothes for the teenager.
To ease the pain of losing her family, Boyles got her granddaughter a puppy, but is now worried that she may not be able to pay for the dog’s maintenance.
“I’m worried about giving up the puppy – he needs shots and dog tags that cost $ 6, but that’s a lot of money when you need milk and bread,” said Boyles, who explained that she and her husband both are disabled and receive a total of about $ 2,000 a month in benefits.
She is also concerned about Manchin’s reported insistence that if the extended CTC were to be renewed, it would have to come up with a work requirement – neither she nor her husband work as they are disabled. In Boyles’ view, there are many grandparents like her who take care of their grandchildren and are either retired or disabled, and she said this claim would simply harm children who have no guilt.
“Why should she be punished because her parents are dead and we are older grandparents taking care of her?” Boyles said about his grandson.
Local economies get a hit
The expanded CTC not only gave families more pillow in their budgets, but also helped lift local economies because the money was typically spent on groceries, rent, clothing, education and other daily expenses.
In 2021, the improved program was expected to increase total U.S. consumer spending by $ 27 billion and generate $ 1.9 billion in new local and state taxes, according to a study by the moderate Niskanen Center. Florida officials said this month that the state collected nearly $ 400 million more in taxes than it had expected, pointing to the CTC as a factor behind the profits, according to the Tampa Bay Times.
But as families cut back on spending, local retailers and businesses could also feel the pinch. Getting a monthly payment instead of claiming the child tax deduction annually when filing taxes was a blessing for families as it allowed them to budget, said Natacha Chavez, a mother of two from Phoenix, Arizona, whose monthly CTC- check of $ 500 ended in December.
Because Chavez lost his job during the holidays, the loss of the tax deduction could be felt more in the household finances, she noted. Without the extra money, she cuts down on everything from gasoline to groceries.
“When the price of gas goes up, it didn’t feel that hard because there was the extra money in your budget,” CTC told ChBS MoneyWatch. “Now we have to think, ‘Will we go on the extra trip?’
Omicron rise, winter costs
Parents are losing the monthly payments not only as inflation increases but as the nation suffers from yet another increase in COVID-19 cases due to the Omicron variant. It strains family budgets and makes difficult decisions. Chavez noted that she would like to buy high-quality K95 masks for her family, but said the cost is prohibitive.
Johnson, the single parent in West Virginia, said she is concerned about schools returning to distance classes because of the recent COVID-19 increase, which would mean her children would lose free personalized breakfast and lunch at school . “I really want to fight,” if that happens, she said.
Others point out that child benefits cease as families also face higher costs for winter warming, with inflation pushing up energy costs sharply. The government has warned that households could see their heating billscompared to last year.
“We’re in the middle of winter in West Virginia, and people will not be able to pay their gas bill, will not be able to afford their food,” said Brian Butcher, a city counselor in Morgantown, West Virginia who is also a retail manager.
Butcher, 34, said he was worried the expanded CTC would not be renewed because of Manchin’s opposition to the tax deduction, which had given Butcher $ 550 a month to his two children. To prepare, he and his wife have cut back on their grocery budget and cut it down to $ 100 per person. week; and refinanced their car payment to lower their monthly costs.
The CTC reached about 350,000 children in West Virginia, said Ash Orr, a federal campaign spokesman for the West Virginia Center for Budget & Policy. About 50,000 of these children are likely to slip into poverty without the payments, with children in the countryside at higher risk, the non-party political research group found.
“When you’re located in these rural areas, things as simple as electricity and heat are more challenging,” Orr noted.
For now, families say they are reworking their budgets, while some hold out hope that the expanded CTC can return in some form. Poverty reduction experts also continue to advocate for the tax deduction. Without changes in the law, CTC will return to its former form in 2022 – a tax deduction of $ 2,000 taken annually, against the extended CTC’s credit of up to $ 3,600 per year. children, with half in monthly cash payments.
Meanwhile, parents should file their tax returns as soon as they can to claim the other half of their CTC, which the IRS will provide through their tax refund, noted Greg Nasif, political director of the anti-poverty nonprofit Humanity Forward. The IRS will begin processing tax returns on January 24th.
“With inflation, the Omicron variant, and with the end of the CTC, it’s a one-two-three blow that families can not cope with,” Nasif said.