‘Revolutionary’ federal stimulus bill could cut California child poverty by half
The $1.9 trillion federal stimulus package includes a temporary expansion of the child tax credit. Some California experts are likening it to a universal basic income and say it’s urgently needed, especially for California’s families with undocumented parents left out of previous stimulus relief.
As President Joe Biden’s $1.9 trillion virus relief package heads to the Oval Office for his signature, the mammoth spending bill has the potential to reduce child poverty in the Golden State by half.
That would be a turning point for a state that is an economic powerhouse vexed by the highest poverty rate in the nation when accounting for the cost of living.
Economists and progressives are hailing as “revolutionary” a provision to send periodic cash to most families with children through a one-year expansion of the existing child tax credit. When combined with the state’s new stimulus aid, the payments could lift millions of Californians out of poverty this year, particularly immigrant households that have borne the brunt of the pandemic’s health and economic effects.
The expanded child tax credit will go a long way for Alma Jimenez, an undocumented single mother of 8-year-old Abraham, who is a citizen. Abraham has been in virtual school for nearly a year, forcing Jimenez to take occasional house-cleaning jobs and make artisanal soaps from home.
“I haven’t paid the light bill, PG&E” and several months of rent, said Jimenez in Spanish from the one-bedroom they share in Concord. “It would help me pay them. Maybe my car insurance. I’d distribute it.”
As logistics of the child tax credit are still being worked out by the IRS, the federal package passed by Democrats in Washington, D.C., achieves something California progressives have dreamed of, but had not yet achieved: sending monthly cash aid to families in poverty with no application process, work requirements or restrictions on how to spend the money. In recent years, Gov. Gavin Newsom and fellow Democratic lawmakers have made strides on various proposals, such as a $1,000 tax credit to low-income working families with children under 6, but failed to pass a bill intended to lift all children out of deep poverty.
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California experts say this one-year policy will be a political test for a permanent child allowance in the United States, and they hope it passes with flying colors.
“If it were to be made permanent, it would be the most important anti-poverty program for children in our history,” said UC Berkeley economist Hilary Hoynes, one of a committee of experts who recommended this policy in a 2019 National Academies of Sciences, Engineering, and Medicine report on reducing child poverty.
Cut child poverty rate by half
Biden is expected to sign the stimulus bill on Friday. It also includes $1,400 stimulus checks for individuals making less than $80,000 and couples earning $160,000 or less annually, extra $300-a-week unemployment payments extended through Sept. 6, and a cash infusion for state and local governments.
Through the expanded child tax credit, the federal government will send regular payments that add up to $3,600 per year for each child under the age of 6 and $3,000 for each child under 18. Single parents making up to 75,000 and couples earning up to $150,000 per year are eligible, covering over 60% of California households with children, according to a CalMatters analysis of Census data.
At stake for California is the chance to slash its child poverty rate in half, from 17.4% to 8.7%, according to researchers at Columbia University’s Center on Poverty and Social Policy, who crunched the state’s poverty estimates for CalMatters. An estimated 7.9 million California children would benefit from the expansion.
The stimulus package faced unanimous opposition among Republicans, but the child tax credit expansion garnered less criticism. Some critics warn it could disincentivize parents from working or getting married.
“This isn’t a rescue bill, it isn’t a relief bill, it is a laundry list of left-wing priorities that predate the pandemic and do not meet the needs of American families,” said House Minority Leader Kevin McCarthy, a Bakersfield Republican.
The IRS could start providing advances on the tax credit as soon as July 1, likely on a monthly basis. That means that families will likely receive nearly half of their total 2021 child tax credit this calendar year, and claim the rest when they file their 2021 tax returns next spring.
Why are experts calling this revolutionary?
Public policy experts say the child tax credit expansion is significant in three ways. For one, Congress expanded the annual dollar amount substantially, up from the current maximum of $2,000 for each child. Second, it will now be universally available to all families with children who make under $75,000 per parent. Currently families with no income don’t qualify and the lowest-income families qualify for less.
Finally, it will be available on a monthly basis. That will greatly reduce financial anxiety, said UC Santa Cruz sociologist Chris Benner, who directs the Institute for Social Transformation. This gives parents the stability they need to seek new economic opportunities as the country recovers from the pandemic, Benner said, like paying for child care so they can go back to work or returning to school to get a better job.
And that the cash will be unconditional is both “revolutionary” and “still weirdly controversial,” said Alexandra Cawthorne Gaines, vice president at the Center for American Progress, who previously advised governors across the country on social policy.
“There are still people who fully believe that low-income people of color, in particular, are not capable of making wise decisions with their money, so they want to put conditions on how they spend their cash,” Cawthorne Gaines said.
Taken together with California’s new $600 Golden State Stimulus payments for an estimated 5.7 million low-income households, the expansion could mark a financial turning point in the pandemic for hundreds of thousands of California families with undocumented parents, who have been excluded from most other pandemic relief efforts like stimulus checks and unemployment benefits.
That’s because the Golden State Stimulus provides extra aid totalling $1,200 for low-income undocumented workers. And the federal child tax credit is available for all citizen children regardless of their parents’ immigration status — including the one in eight school age children in California estimated to have an undocumented parent.
Where’s the evidence this will work?
The idea of sending regular cash to families is not novel. The United Kingdom halved child poverty in less than a decade with a bundle of policies including a child allowance. Canada is on track to do the same.
In fact, not having a child allowance sets the United States apart from other peer nations and leaves us with a much higher child poverty rate, said Clare Pastore, a professor at the USC Gould School of Law who specializes in poverty and civil rights.
“This benefit is a step towards a child allowance, which has been proven over time and in many nations to be one of the most significant steps, if not the most significant step, in reducing child poverty,” Pastore said.
California’s $1,000 young child tax credit, passed in 2019, is actually the “closest relative” to what Congress has now done, said Hoynes. That’s because the amount doesn’t decrease for lower earners.
California has set the stage for this policy in other ways. The city of Stockton ran a two-year universal basic income pilot program to give $500 each month to 125 residents, and reported promising results last week. After one year, 40% of participants had a full-time job — up from 28% — and reported that the cash had allowed them to reduce gig work, complete internships and get training needed to find better jobs. Anxiety and depression fell. Participants were better prepared to handle unexpected expenses. The most common use for the cash was food.
Think of this as a “down payment” on reducing child poverty, said Cawthorne Gaines, but more needs to be done to make sure that hard-to-reach children — like those in immigrants families, foster families or the juvenile justice system — get the benefit. And other social safety net programs still need strengthening, she said.
That’s clear to Carol Taylor, a South Los Angeles single mom of sixth-grade twins.
The child tax credit will make a welcome dent in her monthly meal budget and distance learning expenses: the internet bill that doubled when Taylor upgraded to higher speed for Zoom classes, a 24-inch touchscreen computer for the kids, a large tent for Taylor to take her own work calls as a disability advocate in the backyard, and the $70 an hour she’s paying for a private tutor, due to concerns about her daughter’s charter school and the Los Angeles Unified School District failing to deliver adequate support for her documented learning challenges.
“They don’t care,” Taylor said. “That’s what COVID’s revealed. It’s up to us as parents.”
“For sure, the funds will help,” Taylor said, but she said it will take more than monthly checks to account for faltering public schools and costs of living that have skyrocketed since Taylor moved to Los Angeles in the early 1990s.
CalMatters economy reporter Lauren Hepler and The Mercury News reporter Laurence Du Sault contributed to this report.
This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California.