Blog Post

Guest Insight: Utah Needs a Federal Child Allowance

By: Louise Knauer and Susan Olson

Note:  The opinions expressed represent the views of the Utah Citizens’ Counsel and its Social Support Systems Committee. The views do not reflect an institutional position of the Gardner Institute. We hope the opinions shared contribute to the marketplace of ideas and help people as they formulate their own INFORMED DECISIONS™.

The Utah Citizens’ Counsel (UCC) is an independent, non-partisan group of senior community advocates dedicated to improving Utah public policy on a range of issues. We issued our latest report in November 2020.  We sometimes think of ourselves as the voice of well-informed grandparents, bringing current research and long experience in public affairs to bear on issues that affect future generations of Utahns. We have taken a particular interest in the well-being of the youngest residents of Utah, especially the impact of poverty on very young children.

Utah does have a child poverty problem. The latest data from the Annie E. Casey Foundation for Nov 25-Dec 21, 2020, report that 12% of adults were in households with children who sometimes or often did not have enough food to eat in the past week. Seventeen percent of adults living in households with children had slight or no confidence in paying the next rent or mortgage payment on time.

Poverty harms children in ways that last a lifetime. Poverty does the most profound harm to children from birth through the age of five. In 2019 the National Academies of Sciences, Engineering, and Medicine (“the Academy”) issued a report requested by Congress, reviewing the scholarship on the many negative effects of poverty on young children, and determining the most effective programs to decrease childhood poverty by 50% in the country within 10 years. The Academy affirmed that poverty, in and of itself, causes negative child outcomes, especially if it begins in early childhood and/or is persistent. Other research has found that the poverty of mothers is independently associated with increased infant mortality.  Poverty harms children because the earliest years of child development are foundational to the brain’s architecture, impacting a child’s lifelong learning ability, behavior, and health. Impoverished children will suffer from deficiencies in life skills that take much greater effort to mitigate later in life with increased costs for homeless facilities, remedial education programs, medical services, public safety, corrections, welfare, and food programs.

Numerous studies have demonstrated that when poor parents’ incomes are even modestly increased, their children are healthier, less subject to toxic stress, and more successful in school and later life. The Academy found that child poverty costs the country as a whole $800 billion to $1.1 trillion each year – 4.0 to 5.4% of GDP – so funds spent on decreasing childhood poverty would be cost effective by substantially decreasing these expenditures.

The Academy report found that existing government tax and transfer programs (Earned Income Tax Credit (EITC), Child Tax Credit (CTC), Child and Dependent Care Credit (CDCC), SNAP (food stamps), school breakfast and lunch programs, etc.) decreased the child poverty rate from 27.9% to 15.6% between 1993 and 2016. After analyzing 20 program and policy options, the Academy found that none of those options alone would reduce by 50% both childhood poverty and deep poverty (family income below 50% of the poverty level). However, it found that the single most effective option for reducing both poverty and deep poverty among children would be a child allowance of $3000/year per child. The $3,000 child allowance would reduce childhood poverty by 41% and deep poverty by 50%.  At least 19 other countries have child allowance programs.

In the United States the current Child Tax Credit system is our closest approximation to a child allowance.  Parents who earn at least $2,500 a year are eligible for a child tax credit, which phases in as the family income increases, to a maximum of $2,000 a year. However only $1,400 of that sum is refundable.  That is, if a family does not owe federal income taxes in the amount of at least $2,000 a child, they do not get the full value of the CTC. A separate Child and Dependent Care Credit is worth up to $1,050 for one child, and $2,100 for two or more children in paid childcare up to age 13, but this credit is entirely nonrefundable, which means the poorest families do not benefit from it.

The American Rescue Plan (ARP), proposed by the Biden Administration, substantially enhances the current child tax credit with a one-year CTC and CDCC expansion as part of the Covid economic relief package.  The ARP would increase the CTC to $3,600 a year for children under 6 and $3,000 a year for ages 6 through 17, even for those with no, or very low, income.  The ARP makes the CTC fully refundable, so the families of 27 million children, including nearly half of all Black and Latino children, would get the full credit for the first time. The ARP also increases the CDCC for one year and makes it fully refundable for parents of children up to age 13. Parents would receive reimbursement for childcare expenses up to $4,000 a year for one child and up to $8,000 for two or more children.

Senator Mitt Romney has offered a bill as an amendment to the ARP which would replace both the Biden CTC and CDCC proposals with a permanent child allowance of $4,200 for children from four months before birth to age 6, and $3,000 for children ages 6 to 17, payable on a monthly basis by the Social Security Administration, capped at $1,250 a month.  To make the plan deficit neutral, certain other programs like Temporary Assistance for Needy Families, CDCC, Head of Household, State and Local Tax Deduction would be eliminated, and the EITC and SNAP would be decreased.

Both parties’ proposals deserve close analysis to determine which raises more children out of poverty, produces long-term gains, can be administered effectively, targets the most needy, and minimizes negative side effects. Congress should develop a plan that can win bi-partisan support and reduce the deleterious effects of childhood poverty. Increasing funds available to low-income families would produce significant benefits to Utah children, and to the State as a whole, by reducing expenditures on remedial education, health care, corrections and social services.