Analysis: The Child Tax Credit Didn’t Cause Exit From the Labor Force

If the highly controversial Build Back Better legislation had already been signed into law, approximately thirty-six million American families would be awaiting their second Enhanced Child Tax Credit (CTC) payment of the year. The enhanced child tax credit is seen by many cash-strapped Americans as an unofficial version of the much-wanted fourth stimulus check.

However, this bill, which seeks to add an additional twelve months to enhanced appropriations, continues to be on shaky ground due to steadfast opposition from Sen. Joe Manchin (D-WV), who has argued for weeks that the credit expansion would only discourage people from working and that any additional federal spending would only exacerbate the current burning inflationary pressures.

Testing Manchin’s Claims

A new analysis of Census Pulse Survey data from the Social Policy Institute (SPI) at Washington University in St. Louis appears to contradict one of Manchin’s claims. The data show that the tax credits did not cause any significant outflow from the labor force.

“Research indicates that providing parents with financial support for their children does not cause them to forego employment income altogether,” said the report, which was released with Appalachian State University.

“There is no evidence in data from the Census Household Pulse – a large source of high-quality, nationally representative data – that CTC payments cause people to leave the labor market,” the report continues. .

In fact, the researchers found that families earning $50,000 or less per year actually saw their “self-employment rate increase by 2.9 percentage points as a result of CTC payments.”

They added that “if this trend continues, it could indicate that the CTC is encouraging low-income households to take up self-employment to make ends meet.”

Focus on child poverty

Meanwhile, other polls and studies have found that the continuation of expanded credits would be very beneficial in improving child poverty rates.

According to an analysis published by the Center on Poverty and Social Policy at Columbia University, around four million children could fall into poverty. This translates into a child poverty rate of around 17%, the highest level seen in over a year. For comparison, the estimated poverty rate in December 2021 was 12.1%.

Additionally, a survey by ParentsTogether Action showed that due to the end of extended credits, 50% of respondents said it would be harder for them to provide for their family’s basic needs and 36% admitted that they would no longer be able to meet the basic needs of their families.

A separate analysis by the Center on Budget and Policy Priorities claimed that almost ten million children could potentially fall back into poverty without an expansion of funds.

Ethen Kim Lieser is a Washington State-based science and technology editor who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow him or contact him on LinkedIn.

Picture: Reuters.

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