More than a decade ago
, Sheila Arias, a single mother in Durham, gave birth to her first child, a daughter with special needs whose medical condition required surgeries and therapies that mounted into hundreds of thousands of dollars in medical debt.  

Arias, a campaign organizer for MomsRising, says paying for the ongoing cost of care while providing for her now nine-year-old son hasn’t been easy, but recent stimulus checks have helped, and her new full-time job offers hope.

“Financially, I’m going to be stable,” Arias says, “but I’m not there yet.”

For Arias, and millions of other North Carolinians, additional help is on the way. 

Tucked inside the recently signed coronavirus relief bill was a revolutionary provision to aid families that local anti-poverty advocates have dubbed a “game-changer,” “unprecedented,” “a dream come true,” and “long overdue.”

The provision included in the American Rescue Plan raises the existing federal child tax credit that families can use to reduce their tax bill from $2,000 per child to $3,600 for children under the age of 6 and $3,000 for children ages 6 to 17. The new measure also eliminates a minimum income requirement to qualify for the tax credit, opening the door to low-income earners. 

But the real revolution is that the credits will be paid out in monthly installments, creating almost a child allowance or guaranteed income source for families. Those fighting child poverty say this money will have a profound impact on the lives of North Carolinians.

As early as July, families can expect to receive $300 a month for each child under 6 and $250 per child under 18, a temporary benefit that will last through December although Democratic lawmakers hope to make the new credit permanent.    

“It’s hard to find enough superlatives to describe the significance of the American Rescue Plan, and the child tax credit in particular, in addressing child poverty,” says Michelle Hughes, executive director of NC Child, a Raleigh-based children’s advocacy group. “Most of us have never seen public policy addressing poverty on this scale in our lifetimes.”

Other advocates from nonprofits working to help struggling families overcome lackluster social safety nets that don’t go far enough to aid an unacceptable number of children living in poverty share this sentiment.

Sharon Goodson, executive director of the anti-poverty nonprofit North Carolina Community Action Association, says the new child tax credit “is the single most impactful legislation strategically targeted to address the needs of low-wealth children and families since President Lyndon B. Johnson’s war on poverty.” 

Johnson’s war on poverty initiatives included, among other things, the creation of Medicaid, food stamps, and special funding for schools in low-income areas.

Similar to those anti-poverty programs, the monthly aid provided by the child tax credit will “help to eliminate some of the despair and anxiety that struggling, poor families experience every day,” Goodson says. “Having the resources to move a step beyond poverty is a dream come true for the families that we serve.”

‘Unprecedented’ Aid

It’s hard to overstate the significance of the expanded tax credit for low-income families.

Information released by the Institute on Taxation and Economic Policy found that more than 2.6 million children in North Carolina stand to benefit from the credit, and the Center on Budget and Policy has calculated that the legislation will move 137,000 North Carolina children out of poverty. 

Nationwide, the credit is projected to cut in half the number of children living in so-called deep poverty—or in households whose incomes are 50 percent below the poverty line—and reduce the overall number of children in poverty by about 40 percent, according to an analysis by Niskanen Center, a center-right think tank. 

The new credit will cut poverty rates in part through its unique delivery system of providing half of the money through monthly allowances, with the other half available when parents file taxes next year.

“Spreading out this support can provide a comfort to parents, knowing this benefit is sustained over a period of time,” says Chance Van Noppen, executive director of Saint Saviour’s Center. 

“I think we all are comfortable with saying that we’re living in unique times,” he says. “Although I can’t say this level of support is surprising, it’s certainly unprecedented.” 

New Qualifiers

A key piece of the expanded child tax credit is the elimination of those income requirements. Previously, households had to report an annual income of at least $2,500 to qualify, and low-income earners might only qualify for a $1,400 credit rather than the maximum $2,000.

Eliminating the income requirement makes the credit available to an additional 27 million children, according to data from the Center on Budget and Policy Priorities, a progressive think tank. 

“One of the best parts of the new child tax credit is that it now includes the lowest earners—people whose incomes were so low they are not required to file a federal tax return,” Hughes says. “They had previously been left out of the child tax credit—now they will qualify. That is huge for kids in the very poorest families.”

Outreach Needed

While the changes were enacted to benefit low-income families, the monthly payments will only go to families in the IRS database. In other words, those who haven’t filed taxes because their incomes didn’t meet the minimum threshold will need to self-identify with the IRS to take advantage. For instance, a married couple who earned less than $24,800 in 2020 is not required to file federal taxes this year while a single person who earned less than $12,400 also wouldn’t need to file. 

“One of the greatest challenges in North Carolina will be the need for robust outreach and education, a way for low-income families who haven’t been filing taxes to file taxes, so they can be connected to this support,” says Alexandra Forter Sirota, director of the Budget and Tax Center at the North Carolina Justice Center.  

The IRS plans to design an online system for non-filers to report their status that would identify those who qualify for the credit but are now in jeopardy of slipping through bureaucratic cracks, similar to what the IRS did to deliver stimulus checks. Details of the plan have not been released yet, however. 

“The trick will be implementation,” says Lisa Gennetian, professor of early learning policy studies at Duke University. “Can the IRS do this well and reach all families?”

Making It Permanent

Assuming a smooth rollout, the American Rescue Plan arrived at the perfect time for families living under the stress of poverty made worse by the instability of a pandemic.

“This is a bill that recognizes the suffering and unbelievable financial stress that so many families have experienced over the last year,” Hughes says. “It targets investment toward those things that are going to boost families’ ability to raise their kids—stable income, quality childcare, increased access to health care coverage, food security. The cumulative impact of these investments is that we have stronger tools to help kids and families recover from what has been the most devastating year that we have seen in our lifetimes.”

While the economic rescue package was passed in response to the economic fallout of the pandemic, supporters of the plan hope the expanded child credit will become permanent. As passed, the credit is temporary and will expire at the end of the year.

“It’s about time that such a policy exists—and not just temporarily because the country’s in a crisis,” Sirota says. “We need to be doing this long term.”

Democratic lawmakers have said they plan to renew the modified tax credits but may face opposition from a Republican caucus that unanimously voted against the broader $1.9 trillion rescue package. 

And while the credits are projected to drastically reduce child poverty levels, millions of Americans will still live below the federal poverty line. The United States lags behind other developed countries, which routinely provide generous parental leave and childcare benefits.

“Whether the current stimulus package will lead to the needed long-term permanent change to address child poverty is an open question,” Gennetian says. “Millions of children were already at high economic risk before the pandemic began, especially children of color. All evidence points to how this racial poverty gap will only get worse. The stimulus package will help, but solving structural inequities will require even broader and bolder public investment.” 

For Arias, a permanent child allowance would at least provide an important new step toward security, giving her the ability to pay off debt and save money for family emergencies.

“I would be able to do what normal parents do,” such as save for her children’s future, she says. “It brings hope.” 

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