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Under the Biden administration, a large push for an increase in the child tax credit and education spending has been made. This was a large part of Biden’s campaign, and part of it that he is seeing through. About two weeks ago, the first payments hit the bank accounts of low income parents. How will this expanded tax credit benefit our people and our economy?
A fairly new analysis from the Niskanen Center finds that the expansion of the child tax credit will provide significant benefits to the broader economy, especially in rural America. According to the analysis, the temporary, one-year boost to the child tax credit — which is now delivering up to $300 per child to the majority of American households — will result in $27.6 billion in additional spending and provide support for more than 500,000 new jobs. It will also produce an estimated $1.9 billion in revenues for local governments from sales taxes. The increase in jobs and the money flowing into the economy are major selling points of the expansion.
“While only enacted for one year, the expanded CTC is expected to reduce child poverty by 40% and support investments in children that promote family stability,” Niskanen said in a press release. “Less appreciated, however, is how child benefits like the CTC can serve as a powerful economic stimulus for local communities given the greater consumption needs of households with children.”
The analysis also finds support for the idea that providing money to lower-income households provides more bang for the buck than giving money to higher-income families. This occurs as the former are far more likely to spend their benefits quickly, creating more economic activity than the latter would. This “implies that the economic impact of the CTC will exceed its headline budgetary cost,” the analysts say.
On the other hand, many are concerned with the size of the expansion as our country falls into a larger national debt. This is even true for many of the people who will benefit from the expansion. Given the way the tax credit is structured, more money will flow to states with lower household incomes and larger families, including many red states who tend to oppose expansions of the social safety net.
For now, it seems as though this expansion will benefit America and her people. However, as our national debt grows while our spending is only increasing, we may not be able to expect expansions like this to continue to rise.
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This article was originally published in GREY Journal.