Another day, another federal experiment. This time, it's sending cash to families as a child tax credit. The first payments are going out now, and some folks have filled social media with how happy they are to get it. We see a need for caution.
Nyssa Kruse is one of this newspaper's excellent reporters. She explains the new tax credit payments in The Article, a newsletter that concerns Arkansas news and culture (you can sign up here: http://tiny.cc/n7jauz).
"The monthly payments are from the IRS, which is providing early distribution of the child tax credit, thanks to the pandemic aid package passed in March," the newsletter states. "The federal relief bill increased the amount of the credit to as much as $3,600 per child 5 and under or $3,000 per child age 6-17. Additionally, instead of giving the credit after a parent or family files their income taxes, they will now receive half the amount they're eligible for broken up into monthly payments from July to December."
"A single parent with a 3-year-old and an expected income for 2021 of $50,000 is eligible for the maximum credit of $3,600 per child. They would receive $300 per month from now until December, a total of $1,800. Then they would receive another $1,800 when they file their taxes in 2022."
President Biden seems convinced these payments will help lift a great number of children and families out of poverty. To find out what the impact of these payments on Arkansas might be, we spoke with the man all business reporters in this state talk to now and again, Mervin Jebaraj, director of the Center for Business and Economic Research at the Walton College of Business.
Mr. Jebaraj said while the payments aren't a very large stimulus like some of the checks Arkansans saw during the pandemic, they will be a fairly substantial one, given that they cover almost every family in The Natural State.
He said almost every family will get $250 or more depending on the number of children, and given that we're nearing August, that money will probably go toward school expenses or to help families pay child care costs.
Mr. Jebaraj said he expects sales, child care and groceries to be the main business sectors consumers spend these payments on (though we're thinking with the current inflation, those dollars won't stretch as far as they would have previously).
We asked Mr. Jebaraj what the biggest impact from these payments will be several months down the road. He said if you look at the entire program, there are some design flaws. For starters, the pre-filing website (where folks manage their payments from the IRS) isn't as effective as it could be. But . . . .
"There's been plenty of research connecting childhood poverty to lower birth weights, maternal stress, poorer childhood nutrition and poorer academic outcomes," he said.
Parents we talked with already had the money earmarked.
Adam Belcher is a teacher and head track coach at Bryant Junior High School. He said the child tax payments his family receives will go toward offsetting tuition costs and stashing away for any "what ifs" that are sure to come up through this next school year: "Our budget won't change. We aren't going to, all of a sudden, start living above our means," he said.
Jordan Compton is a public defender in Little Rock and said the money will help with child care.
"For us, it means that half of our child-care bill will be taken care of for the next few months," he said.
It sounds like those families are putting the money to good use.
But let's not forget. These are advanced payments of the credit that usually comes in the spring. And next year's federal income taxes will look much different. We're not fans of using the federal refunds every year like savings accounts (why let the government use your money for free for 12 months?). But for those who do look forward to big refunds every spring, this April might hold surprises. Like a much smaller refund, or even a bill from the IRS. As the old gospel-influenced song says, people get ready.
Some pols have talked about extending the tax credit payments or making the program permanent, among them Treasury Secretary Janet Yellen. The country is barely one payment in, and some of our betters are chomping at the bit to write this in stone. Shouldn't we wait and see the full results before signing over more money from the grandkids?
Eliminating poverty is a beautiful dream. One president even campaigned on declaring war on poverty. His name was Lyndon B. Johnson, and he pushed for a Great Society, a number of government welfare programs designed to reduce and eliminate poverty.
The plan had mixed results at best. A decade after 1964's introduction to the war on poverty, the U.S. poverty rates declined from 17.3 percent when the Economic Opportunity Act was implemented to 11.1 percent in 1973.
That makes it sound like a success, but here's the trick: The steep decline in poverty began five years before the war on poverty even started. Lies, damned lies, etc.
A conservative might say the best way to eliminate poverty is to foster economic conditions that allow families to move up the ladder and earn more money to take care of their own children.
What we know right now is President Biden and his friends have given the Treasury's printing press a couple of big turns, and inflation is up. The Biden administration argues it's a temporary result of coming out of the pandemic into an accelerated recovery. But if that's not the case, the U.S. is in serious trouble.
So you'll understand if we want to take a more cautious approach. You wouldn't commit to buying a car without driving it around the block a couple of times.
We asked the Arkansas Economic Development Commission what it thought about the new payments.
"While many families in Arkansas have struggled during the pandemic, our state has rallied around its people by providing resources in many areas such as rental assistance, child care, business loans, and more," said Secretary of Commerce Mike Preston.
"We've made great strides in recent months and have begun to see Arkansans get back on their feet as fewer people are filing for unemployment and more are going back to work. Our unemployment rate remains stable at 4.4 percent, but with many unfilled jobs I fear the new child tax credit could hurt our efforts in the recovery process."
Hurting Arkansas' workforce is the last thing we want to do right now.
But Steve Clark, president and CEO of the Fayetteville Chamber of Commerce, said the chamber is pleased with the money going out, saying if workers don't have to worry about money for groceries or gas or rent, they're more productive employees.
Mr. Clark said the chamber advocates for its workforce, and the credits are valuable to workers.
"If it makes life easy for the workforce, we like it strongly," the chamber president said.
Let's wait and see how much it helps families and the workforce. Providing for children is never a bad thing, so it's important to make sure these tax payments do that.