The Biden Administration’s expansion of the Child Tax Credit (CTC) provides guaranteed income to 90 percent of Maine families and will cut child poverty nearly in half. By the end of the year, the new and improved CTC will generate over $90 million in new household spending, raise over $8 million in new state and local sales tax revenue, and support over 1,700 new jobs at the median wage, according to analysis by the Niskanen Center. All Mainers will benefit from this economic growth and should urge federal legislators to make the improved CTC permanent.
Maine families need the boost. According to Maine Center for Economic Policy analysis, 45 percent of Maine families couldn’t afford an unexpected $400 expense in 2018. A Household Pulse Survey conducted June 23 to July 5, 2021 reveals the situation has worsened as a result of economic consequences in the wake of COVID-19. Among adults in households with children, 27.8 percent of respondents reported it was somewhat or very difficult paying for usual household expenses during the pandemic. Nearly 1 in 9 adults in households with children weren’t current on their mortgage payments and about 1 in 10 reported either slight to no confidence in making their next payment.
The improved CTC provides families with resources to meet basic needs and support children. While those dollars are not restricted to specific uses, a study of the recently expanded CTC in Canada suggests families typically spend the money on goods and services that support education, reduce stress, and improve family stability — families spent 13 percent of their new income on school supplies, 17 percent on rent, 8 percent on food, and 6.5 percent on transportation. The study also found that for every dollar increase to the CTC the consumption of tobacco and alcohol was reduced by 6 to 7 cents, likely because of a decrease in stress.
As Maine families spend CTC funds on goods and services, the ripple effects of these expenditures will support additional jobs and commercial action. The initial $90 million increase in new household spending generated by the improved CTC could result in almost $350 million in economic activity.
Across the US, families and children in rural areas benefit more from the CTC expansion — as a state with many rural communities, Maine receives significant relief from the CTC. Helping families meet their needs while bolstering the economy, the improved CTC is a sound investment that all Maine legislators should support.
Guest blog by Levi McAtee