Under the current law, an estimated 3 million children living in rural America will not be eligible for the full $2,000 Child Tax Credit, according to the Center on Budget and Policy Priorities.
The families and children would not be eligible because the family income is too low, said Sarah Calame, research assistant for the center.
“The current Child Tax Credit leaves out children across the country, but leaves out sort of a larger share of children in rural areas due to disparities in pay between rural and urban areas,” Calame told the Daily Yonder. “So as the credit is currently set up for low-income families, the amount of credit you get sort of increases as your earnings increase. So because of that aspect of the credit design, it means that because pay is generally lower in rural areas, there are more kids who are left out of getting the full $2,000 per child under the current Child Tax Credit.”
Children in families with higher incomes (up to $200,000 in households with single parents and up to $400,000 in households with married parents) receive the full value of the Child Tax Credit, while many children in families with low or no earnings are denied some or all of the credit.
The pandemic-related American Rescue Plan made the credit completely refundable for all eligible families and raised the credit to $3,600 for children under 6 and $3,000 for children 6 to 17 years old. The changes expired last year. Some members of Congress are pushing during the lame-duck session to revisit the expanded credit.
Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities, said the current design is “upside down.”
“Families with the lowest incomes get less than families with higher incomes,” she told the Daily Yonder.
Since 1997, when it was initiated, the Child Tax Credit has been tied to earnings or tax liabilities, Cox said.
“Under current law, families’ credit increases as their earnings rise and in relation to their tax liability,” she said. “So for example, a single mother with two children who earns $15,000, working as a home health aide is denied $2,125 of the Child Tax Credit, whereas a family with a single parent with two kids and a much higher income gets the full $4,000.”
Research has shown that the Child Tax Credit can help with a host of improvements for low-income families, including health, housing, education, and more, Calame said.
“We think that all kids deserve a chance to thrive in all of those areas, regardless of where they live, regardless of their zip code,” she said. “And so we think that the current credit, having disparate access to that full credit between kids in rural areas and urban areas, that’s depriving some kids of the full CTC, in some ways based on where they live. We see that one in three kids in rural areas are left out of the full credit. So it’s a really large share.”
Of the estimated 3 million children living in rural communities who are currently left out of the full credit, about 56% are white, 15% are Black, 18% are Latino, 7% are American Indian or Alaska Native (AIAN), less than 1% are Asian, and 4% are another race or multiple races, according to the Center. For each of these groups, higher shares of rural children than metro children are left out of the full credit because their families’ incomes are too low.
In other words, white children living in rural areas are more likely to be left out of the full credit than white children living in metro areas, just as Black, Latino, AIAN, and Asian children living in rural areas are more likely to be left out of the full credit than Black, Latino, AIAN, and Asian children living in metro areas.
Cox said Congress faces a “stark choice this year, whether it’s going to expand the Child Tax Credit, or allow millions of children to fall back into poverty.”
“What we saw last year in 2021, was a major expansion of the Child Tax Credit under the Rescue Plan that made the credit fully refundable or allowed for children and families with low incomes to get the same amount of credit as children and families with higher incomes for the first time,” she said. “In 2021, we saw the credit also distributed in monthly payments.”
This allowed families to pay for rent, food and other necessities.
“We know that this additional money, especially for children, in families with the lowest incomes can make such a difference in their short-term and long-term outcomes,” Cox said.