The improved and expanded monthly Child Tax Credit (CTC) has been one of the most successful and popular American Rescue Plan Act programs, providing flexibility to parents to buy food, make rent, afford child care, and other routine but essential family expenses. It dramatically lowered the number of U.S. children living in poverty — and the ripple effect made our economy stronger by increasing spending in local economies and supporting jobs as families use the money to purchase food, pay bills, and cover school and childcare expenses.
National studies confirm CTC payments succeeded in reducing adversity for kids and improving economic stability across the country. And in MECEP’s new report, How the Child Tax Credit was spent in Maine, we can now see specifically how it benefited Maine families as well.
Utilizing to Household Pulse Survey data, the report finds that, overall, Mainers used the CTC to pay for essentials:
- Food (32.2 percent)
- Utilities and telecommunication (18.6 percent)
- Clothing (14.6 percent)
- Savings or investments (14.1 percent)
- School tuition (2.4 percent)
Among Maine respondents who received the payments, 40.4 percent indicated they mostly used it to pay off debt, the report finds.
“Many parents relied on credit cards and other forms of credit to finance their expenses during economic hardships of the pandemic, so it is not unusual that so many parents used monthly CTC payments to catch up on debts,” cites the report.
Of Maine respondents, 31 percent ‘mostly spent’ and 28.6 percent ‘mostly saved’ the payments.
Families with low income were “more likely to have spent their Child Tax Payments on food, utilities, clothing, rent, and school books and supplies compared to those with higher incomes — and by contrast, higher-income households were more likely to have been able to spend payments on childcare, after school programs, and school tuition,” the report finds. “Mainers with low income were less likely to have been able to save the payments — just 20 percent of households with incomes less than $50,000 indicated they mostly saved CTC payments. Similarly, just 16.5 percent of Maine respondents with disabilities indicated they mostly saved the payments.”
In 2021, the CTC was enhanced to make payments monthly, increase payment amounts, and include children in families who do not file taxes. But at the end of the year, Congress failed to enact a policy that would make the enhanced CTC permanent.
Unfortunately, because many Maine households with low income do not file taxes, although they would still qualify for CTC payments by claiming an economic impact payment through the IRS’s non-filer tool, they are among the least likely to report having received the credit.
An estimated one in seven Maine children lives in poverty, representing 35,000 children growing up in households with average incomes of less than $12,000 a year — and since people of color are overrepresented in low-wage jobs, children in families of color are disproportionately impacted. With evidence suggesting a cash boost has the most benefit for families with low income, it is critical to continue including these households in the CTC payment program. By including households that do not receive enough income to file taxes, the improved CTC ensured families who stand to gain the most would benefit and gives future generations a greater chance to meet their potential.
“Legislators across the state and country considering implementing CTC payments on a more regular basis should see this data as being illustrative of the assistance they provide to families but also the burdens in obtaining the benefits, particularly those already facing economic challenges,” the report concludes. “CTC payments helped many Maine families stay in their homes and purchase food, especially when faced with difficult choices between child care and paid work. However, that many of the households with the lowest income did not have access to the payments needs to be addressed if advance Child Tax Credits payments are considered again in the future, either at the federal or state level.”