Home Business Why the US Starts $ 300 Monthly Children's Allowance

Why the US Starts $ 300 Monthly Children’s Allowance

For the first time, the United States will begin paying monthly children’s allowances. This is a change in earthquakes in developed countries with the highest child poverty rates.

Monthly payments of up to $ 300 (£ 216) per child will hit American bank accounts on July 15th, which lasts until the end of the year.

Some Democrats praise the newly expanded tax credits and say their monthly income sources are more reliable for their families.

But poverty eradication advocates, who have sought monthly benefits for years, hope that the temporary introduction of such a program will lay the foundation for longer-term change. ..

Elementary school children take an exercise break outside at Rogers International School in November 2020 in Connecticut.

So how exactly do tax credits work and what are the expected implications?

How do monthly credits work?


The child tax credit renewal is part of the American Rescue Plan, a $ 1.9 trillion financial relief package enacted in March.

The bill raised existing benefits for the fiscal year 2021 to up to $ 3,600 per child under the age of 6, or $ 3,000 for children up to the age of 17.

In the extended scheme, half of the credit is paid directly to the parent in monthly installments of up to $ 300 per child.

From July 15th to December 15th, monthly deposits will be made to accounts registered with the Internal Revenue Service (IRS) in the United States. Checks or debit cards may be issued.

The remaining amount can be billed in the 2021 tax return, but the family can opt-out of monthly payments and instead choose to receive one lump sum payment later.

The White House states that eligibility and the amount paid depending on income, but about 90% of families receive benefits automatically.

What’s wrong with the old system?
For decades, most developed countries, including the United Kingdom, have provided some form of monthly child allowance to offset the cost of having children.

Volunteers will prepare groceries to be donated to people in need at the Capital Area Food Bank (CAFB) in Washington, DC, USA on February 5, 2021.

Image caption One in six families with children reported lack of sufficient food during a pandemic
However, the United States, which has a long political history of fear that social welfare programs discourage work, has relied on annual tax credits to offset those costs.

First introduced in 1997, how much money a family makes depends on how much the family makes, that is, whether they are obliged to pay taxes.

Studies show that about one-third of children (disproportionately poor, black, or Hispanic) have not fully benefited. About 10% were completely ineligible. The majority of them are because their families earn less than $ 2,500 a year.

“Many children don’t get credit,” says Catherine Michelmore, a professor of public administration and international affairs at Syracuse University’s Maxwell School, who studies this issue.

Under the new (temporary) child tax credit, the poorest households with no income and low income are usually eligible to receive the full amount this year without having to file a tax return.

What impact can the change have?


According to the Treasury and the IRS, monthly payments cover about 88% of children in the United States.

Proponents on the left say that by expanding benefits and making more frequent deposits, the poverty rate of children, which was about 15% before the pandemic, will be reduced by more than 40%, and 4 million children will be saved from poverty. It states that it can be done.

Young people in preschool classes wear vests and masks and hold straps when taking a walk outdoors in Boston
Image Copyright of The Boston Globe by Getty Images
They point to countries like Canada where poverty has decreased with the introduction of children’s allowances in the first few years of the program.

James Sullivan, a professor of economics at the University of Notre Dame, said families near the poverty line could increase their income by more than 25% in the second half of this year.

“Such families tend to spend additional resources on food, housing (ie rent repayments), clothing and other necessities,” he said, with additional income also cash to pay down payments for high-value merchandise. I added that I can provide it. It may be out of reach, such as a car.

U.S. conservatives, like Senator Mitt Romney, who submitted their own proposals for monthly child allowances, said it was a family-friendly policy and a record-breaking defense against the declining birthrate in the United States. It was.

Brad Wilcox, a senior fellow at the Family Research Institute, pointed out that child-related costs such as education are skyrocketing, “because too many young people think it’s too expensive to have and raise children.” Stated.

Is there a possibility that it will be extended?
Parliamentarians have regularly expanded their child tax credits in the past.President Biden is keen to extend these latest changes to 2025. On Thursday, he described them as “a reflection of my belief that those in need of tax cuts are not the top people.”

Experts also warn that increased consumer spending can lead to higher store prices.

Jeffrey Haymond, a professor of economics at Cedarville University, said:

“This may be a valuable social goal to help families with children, but the economy does not currently need additional stimulus and should be combined with spending cuts elsewhere- All that is needed is for the workers to return to work. “”

To extend the change for another four years, legislators must pass an American family plan that includes investing in preschool and hiring more teachers.How is this compared globally?
Megan Curran, a study by Columbia University’s Center for Poverty and Social Policy, states that monthly benefits keep the United States in line with world norms.

US President Joe Biden is working on the Coronavirus Disease (COVID-19) Assistance Act during a meeting in the Oval Office of the White House in Washington, DC on February 5, 2021. Talk to the chair of the committee.
IMAGE COPYRIGHT REUTERS
Image caption President Joe Biden wants to cut child poverty in half (which was about 15% in 2019)
For example, in the UK, the first child has a monthly payment of £ 84.60 and the subsequent child has a monthly payment of £ 56, and with an income of £ 50,000, benefits are beginning to be phased out.

In Canada, allowances can be as high as C $ 563.75 (£ 321; $ 443) per month for children under the age of 6 and up to C $ 475.66 (£ 271.27; $ 374.19) for children under the age of 18. C Starts shrinking with an income of $ 30,000. ..

Some countries, such as Ireland, offer payments regardless of income. In Ireland, the monthly benefit is E140 (£ 122.80; $ 169.30) per child.

However, Ms. Karan warns that the United States, which routinely ranks lowest when it comes to family support policies, is still behind in other respects such as parental leave and childcare.“Child allowance is not a silver bullet,” she says. “It does a lot of tedious work … it meets the costs of your child’s needs and helps ensure that some of these costs are smoothed each month, but there are many others in the United States. There are pieces of the puzzle that need to be dealt with. “

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