Child Tax Credit
As of January 1, households earning at least $12,500 a year will be eligible for the Child Tax Credit. And one proposal that seems to be in the Obama team’s plan for economic stimulus is to lower that threshold to $3,000. That would offer about $18 billion worth of high-multiplier stimulus, because the beneficiaries would be poor families with a high propensity to consume the marginal dollar rather than wealthy households likely to use extra money to try to pick up some bargain investments. But this is a good idea that can be made better by dropping the threshold all the way down to $0. That would add about $1.7 billion per year in extra costs, so $3.4 billion over the forecast two-year life of the stimulus, and help about 800,000 additional children. And of course when it comes to stimulus, finding things to spend money on is the name of the game. This is high-multiplier stuff, so it’s worth doing.
Beyond stimulus, it’s an opportunity to do something about our scandalously high child poverty rate. A brief reminder:
So there we go. Bring the threshold to zero.
34 Responses to “Child Tax Credit”
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January 9th, 2009 at 1:23 pm
This is a good idea. (and yes, it’s straight up welfare) And these are the people to be concerned about – not frickin Stanford MBA grads whose lifetime earnings may be affected because their in a cyclical industry. (I have no idea how 800K kids are even able to *live* on less than 3K bucks)
January 9th, 2009 at 1:23 pm
Government policies are certainly part of the reason why child poverty is so high in America, but they’re not the whole story. There’s also the fact that low-income people tend to have higher birth rates.
January 9th, 2009 at 1:27 pm
Peter – but doesn’t that hold true for other countries as well, including countries w/much lower levels of childhood poverty? This whole entry made me muse upon the issue of what percentage of the population are newly arrived immigrants in the U.S. compared to other countries. Government policies certainly are part of hte problem, but what other factors are at play that distinguish the US from other countries?
January 9th, 2009 at 1:28 pm
As has been said many times: link to wherever you get your fucking #’s from, otherwise its plagiarism and intellectual dishonesty.
Also whatever term you used to define poverty is probably extremely misleading since it only accounts for the income of parents, not the actual living conditions (food, clothing, shelter, etc) of the child.
But that said, what you define as help would do nothing to change the child poverty rate you refer to, since child poverty rate is most likely defined by income, and again cutting taxes for poor people does nothing to change their income, only their taxes.
January 9th, 2009 at 1:41 pm
Thresholds for filing income tax probably affect the decision. Children in households making less than $3000 per year probably have more convenient methods for receiving stimulus payments. They are almost certainly receiving some government assistance. A payment through such an existing system would be more efficient, and more likely to get to the recipient.
Single filing threshold is ~$3000
Head of household threshold is ~$12000
January 9th, 2009 at 1:41 pm
Peter
…. There’s also the fact that low-income people tend to have higher birth rates.
The reason there are so many poor kids in America is that so many people who can’t afford to have kids, have kids. Why should we have financial incentives to work less and have more kids?
January 9th, 2009 at 1:53 pm
The reason there are so many poor kids in America is that so many people who can’t afford to have kids, have kids. Why should we have financial incentives to work less and have more kids?
Lower-income people may have more children, but that’s not necessarily because of government incentives to reproduce. There surely are other factors too, for example lower future-time orientation (and a greater desire for immediate gratification) among the poor.
January 9th, 2009 at 1:57 pm
Relative or absolute ‘poverty’? Basic standards of intellectual honesty dictate that you should let your readers know, particularly if you aren’t going to link to the source of the graph.
January 9th, 2009 at 1:59 pm
The last time Matt posted this, I pointed out that the poverty line that is the basis in that graph is different for each country – it is calculated as a percentage of the median income for each country, so that the graph does not compare the percentage of children living below a mininum decent standard of living (which is what one would expect a comparison of “poverty rates” to mean).
Matt never comments on the comments, but he apparently read my comment last time, because this time he’s omitted the link that allowed me to figure that out.
January 9th, 2009 at 2:02 pm
Of course children are poor, they can only work for limited hours each week. And even if they could work, they don’t have any skills.
Snark aside — it’s easy to lament “Look at the poor children!” but keep in mind that poor children aren’t the problem. They’re indicators of problems.
January 9th, 2009 at 2:10 pm
Jimbo, “But that said, what you define as help would do nothing to change the child poverty rate you refer to, since child poverty rate is most likely defined by income, and again cutting taxes for poor people does nothing to change their income, only their taxes.”?
You don’t know what a tax credit is do you?
January 9th, 2009 at 2:32 pm
The proposal would do nothing about our child poverty rate, because transfer payments are exluded from the income calculation for purposes of the child poverty rate. In many ways, that’s a win for folks like Matt: we can keep spending money, and we’ll always need more, because the money we spend doesn’t count.
January 9th, 2009 at 2:33 pm
So a better set of graphs would be ones comparing the number of homeless or the percent who aren’t getting enough to eat? Do you really think those numbers will make us look much better?
January 9th, 2009 at 2:49 pm
Matt, I’d like to join the chorus asking you to credit and/or link images and graphs that you use. It’s pretty surprising, not in a good way, that you don’t.
January 9th, 2009 at 3:05 pm
daveNYC- I don’t have any idea what an appropriate graph would look like. But bad information is not better than no information. There’s a general tendency to believe that any number is better than no number. That’s false. When you have no useful information, a presentation of useless information is not helpful in making decisions.
January 9th, 2009 at 3:24 pm
Where do you get off, you sick little twist? Sexual? I’m not sexual with them. I’m not abusive with them, how dare you write that in your paper without knowing nothing about me, biting’s not sex, it’s biting! I’m not sick like that. Maybe I should come bite you, would you like that, scotty? I bet you would like that, I am right? You write about me like I’m sick. You’re the sick one, you know that? Is that why you like me, scotty? Is that why? I could come bite you; you tell me how sexual it is. You humiliate me like that? You mortify me like that in front of my father? My father’s father? Listen to me, smack daddy, crack daddy, little baby whack daddy, here’s what’s happening. You ain’t never going to find them anymore. You aint never gonna see them no more. I’m sending you something right now, You take a good look at this guy, because you ain’t ver going to see him no more.
January 9th, 2009 at 3:32 pm
In the US in 2002 about 1 in every 1,000 children between the ages of 1 and 5 died. In 1960 that # was 4 / 1,000
http://www.unicef.org/sowc04/files/Table1.pdf
While any child dying is horrible, that number suggests that the US is doing a pretty good job at keeping our children alive.
January 9th, 2009 at 3:42 pm
This is also very relevant in terms of the rest of the stimulus. So far, what we’ve heard about are funding for projects in industries that are overwhelmingly male-dominated — construction, infrastructure, energy, etc.
There are millions of single-parent households headed by women. And women make less than men to begin with.
What is in the stimulus to save and/or
create jobs in industries that aren’t all-male?
January 9th, 2009 at 3:43 pm
“Snark aside — it’s easy to lament “Look at the poor children!” but keep in mind that poor children aren’t the problem. They’re indicators of problems.”
Really? I’d say that child poverty qua child poverty is a pretty big problem. Yes, it indicates other problems, but how is it not a problem in and of itself?
January 9th, 2009 at 3:51 pm
Because poor = no money. In this country money is paper or metal. No one to my knowledge has ever sheltered themselves in a house made of pennies or dollar bills. No one to my knowledge has ever successfully nourished themselves on pennies or dollar bills. No one to my knowledge has ever liquefied dollar bills and used it in an iv to cure a disease (although I hear a direct infusion of cash will cure AIDS).
I am being a little facetious, but the real problem is malnourishment, lack of shelter, lack of education, etc. And being poor is only a indicator for those problems.
January 9th, 2009 at 4:38 pm
JimboSlice, you’re being awfully tendentious there. I think childhood poverty is the single greatest injustice in our society today. It’s the principle reason why I’m a liberal. If it wasn’t for the fact that we don’t get anything close to an equal start, I wouldn’t be nearly as concerned about inequality. Malnourishment, lack of shelter and poor education all flow directly from being born into poverty. Not to mention the social adjustment problems you tend to have.
January 9th, 2009 at 4:49 pm
Actually I was not being tendentious at all. I was pointing out that the greater problem is not poor kids, but rather kids without housing, shelter, food, etc. That is not biased, that is a fact.
Fact is you can give a kid/parent all the $$ they want, but unless they spend it in a way that relieves housing/food/education problems you have done nothing to solve the kids problems.
If you give a mom addicted to cigs and lotto tickets $1,000 do you think she is going to spend that $1,000 on her kids or on cigs and lotto tickets? However if you give her an apartment, provide a location to get hot food, and give her clothing for her kids she far less likely to turn those things into cigs and lotto cards.
Now before you get pissed off I am not saying all poor people would be spending $$ on themselves instead of their kids, i know a lot of poor parents desperately want better for their kids, what I am saying though is that some would spend the $$ on themselves, and a better use of the funds would be direct investment in solving problems of malnourishment, lack of shelter, etc.
January 9th, 2009 at 7:12 pm
The USA also has a fanatically anti-abortion right wing that makes it difficult for poor women in many states to even obtain effective contraception, let alone abortion. Instead of valid information about and access to contraception, teenagers in American high schools get “abstinence education.” The result is more unwanted children born to teenage parents and more child poverty.
The international comparison bears this out slightly as Ireland and Italy are closer to us in the child poverty rate than less religious European countries.
January 9th, 2009 at 10:50 pm
Greg Mankiw on the EITC and the poverty rate:
“As far as I can tell, all of this is correct, except the last sentence about the EITC being an anti-poverty tool. Why isn’t that last part correct? Because the Census omits the income from the EITC when computing the poverty rate. As a program to reduce measured poverty, the program is, by assumption, doomed to failure.
Of course, this is not really a problem with the EITC but, rather, a problem with the measured poverty rate. It makes no sense to evaluate poverty with a statistic that ignores the effects of one of the largest and most rapidly growing anti-poverty tools we have. But that is what the official statistics do.”
http://gregmankiw.blogspot.com/2006/09/does-eitc-reduce-poverty-rate.html
January 10th, 2009 at 5:49 pm
Nijorl, there’s actually a lot of poor kids whose families aren’t getting any benefits at all. Welfare reform, remember? Food stamps is the most widely received benefit, and that’s why one of the other proposals on the table is to temporarily boost food stamp allotments by about 10 percent. The advantage of that approach is that it gets people the money fast, not waiting until tax season. But you can’t pay your rent with food stamps.
January 11th, 2009 at 12:14 am
JimboSlice; “I am being a little facetious, but the real problem is malnourishment, lack of shelter, lack of education, etc. And being poor is only a indicator for those problems”.
But food, shelter, education, etc, all cost money.
Poverty is the cause. Malnourishment, lack of shelter, lack of education is the result, surely, rather than ‘only an indicator’. Of course, the whole sad scenario becomes a vicous cycle, which can be ended how? By eliminating poverty.
January 11th, 2009 at 12:34 am
JimboSlice; ‘If you give a mom addicted to cigs and lotto tickets $1,000 do you think she is going to spend that $1,000 on her kids or on cigs and lotto tickets? However if you give her an apartment, provide a location to get hot food, and give her clothing for her kids she far less likely to turn those things into cigs and lotto cards’.
…and make her totally dependant on a system of welfare and control that she can never climb out of, thereby creating a cradle-to-grave poverty/welfare cycle for her kids, her kid’s kids and so on.
Not every poor person is a lottery obsessed cigarette smoker. But deny them their self determination and they have far fewer options in life than those of the more affluent.
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