The Left likes to assert that sending new monthly welfare checks to low-income families will help lift children out of poverty without substantially affecting work.
We’ve long said that the Biden administration’s changes to the Child Tax Credit will discourage work, and a striking new analysis from researchers at the University of Chicago revealed that if Democrats make the Biden Child Tax Credit permanent, they will dramatically discourage work and encourage dependency among low-income families.
The Child Tax Credit normally functions as a tax break for working families and was most recently strengthened by the Tax Cuts and Jobs Act of 2017. It increased as families worked more. By providing a tax break for working families, the Child Tax Credit under these reforms helped low-income families have some financial breathing room and relief.
Last March, Democrats in Congress radically reformed the Child Tax Credit in the American Rescue Plan Act for 2021. They made the Child Tax Credit resemble welfare more than traditional tax credits by making the credit refundable. Democrats also raised the amount from $2,000 per child to $3,600 for children under six and $3,000 for children six to 17 years old. And under the pretext of “fighting child poverty,” Democrats changed the annual tax credit into a monthly welfare check.
The Biden Child Tax Credit, which comes with a $1.6 trillion-dollar price tag over the next decade, is simply welfare for all parents. The Biden administration and Democrats in Congress want to make this welfare program permanent, declaring that welfare for all will reduce child poverty.
But this new University of Chicago study shows that the Left doesn’t understand how welfare without conditions plays out. The authors questioned assumptions and found that the outcome for low-income families after receiving no-condition monthly checks was far different than Democrats claim.
The study’s conclusions were troubling:
- The Biden Child Tax Credit will discourage work and keep families dependent on government.
The authors of the study properly estimated how the Biden Tax Credit’s lack of work incentives will affect families’ desire to work and made predictions of the real-world consequences of the credit.
Previous reports made an incongruent assumption about how work-bonus tax credits influence low-income Americans. They assumed that some programs, like the Earned Income Tax Credit (which requires work and increases as work increases) lead to more workforce participation. But the previous report didn’t assume that eliminating the pro-work incentives in the Child Tax Credit would have the opposite effect and reduce work. The University of Chicago authors estimate that with the Biden Child Tax Credit, families who make less than $30,000 will reduce work between seven and 10 percent.
When the University of Chicago study factored in the effect of eliminating the credit’s work incentives, they found that the Biden Child Tax Credit will lead to 1.5 million workers—2.6 percent of all working parents—exiting the labor force.
- Deep child poverty will not drop.
By looking at how parents will respond to welfare without conditions—not working—the study’s authors more accurately predict how the Child Tax Credit will impact child poverty.
The short answer: There will be no effect on deep child poverty (families making less than $18,945). This is a far cry from the 39 percent reduction in deep poverty that Democrats are publicizing.
While the Biden Child Tax Credit could possibly reduce average child poverty by 22 percent, the children in deep poverty—those most at risk—won’t see any difference at all. It could even be worse for them in the long-term.
- It will reverse the employment gains of the 1990s, especially for single mothers.
The Biden Child Tax Credit may erase the positive gains low-income families have made since the 1990s.
In the 1990s, policymakers came to a consensus that work mattered. They increased work bonuses, including the EITC and Child Tax Credit. In 1996, the bipartisan welfare bill reformed welfare to require work in exchange for benefits. And the results were clear: the employment-to-population ratio for never-married mothers grew from 46.4 percent in the five years before the 1996 bill to 62.6 percent in the five years after the bill’s passage.
The Biden Child Tax Credit would erase that work increase and low-income families would be left in deep poverty—and dependent on the government.
Bottom Line: The Biden Child Tax Credit is simply a bad deal for low-income Americans.
Despite the evidence, Democrats in Congress are still trying to push a permanent Biden Child Tax Credit through.
The expanded Biden Child Tax Credit won’t decrease poverty and Americans understand that. That’s why a plurality of voters oppose making the $3,600 Child Tax Credit permanent. In fact, 74 percent of voters want welfare reform, including 65 percent of Democrat voters and 70 percent of Independent voters.
The Child Tax Credit will reward dependency and discourage parents from seeking employment. And in turn, it won’t improve deep child poverty—it has the potential to make it worse in the long run. The study shows, and Americans understand, that the Biden Child Tax Credit is simply a very bad deal for low-income Americans.