Kamala Harris, the vice president, just unveiled her economic platform for the 2020 presidential campaign. The conversion of the Child Tax Credit (CTC) into a child allowance is a focal point. Should the idea come into effect, it would discourage parents from working and might potentially negatively impact their children’s future prospects. Voters should reject the idea due to its expense and unforeseen repercussions.
The current CTC is limited to parents with an income or tax liability and offers up to $2,000 per kid. Under the Harris plan, the credit would rise to $6,000 for infants, $3,600 for kids aged 1 to 5, and $3,000 for kids aged 6 to 17. Furthermore, by giving the entire amount to families with no income and no taxes, Harris would detach the CTC from employment.
Years of progress towards strengthening the safety net would be reversed if the CTC were to be cut off from the workforce. The nation transitioned from monetary aid that was provided unconditionally to a safety net that demanded and rewarded labour in the 1990s thanks to bipartisan welfare reform. Remarkably, the policy change succeeded in encouraging single moms in particular to enter the workforce, defying the predictions of doubters. More resources in the households led to a decrease in child poverty, and as subsequent studies have shown, this also benefited children’s long-term outcomes.
Harris’ CTC plan, which would go a great way towards restoring welfare as we know it, would run the risk of reversing this progress. Harris’ child allowance would provide between $6,000 and $9,600 to a single parent who does not work and has two children. This brings their current food stamp benefit of $9,000 up to a total of between $15,000 and $19,000 in guaranteed, non-work-related support. In most jurisdictions, this would be more than the total (inflation-adjusted) worth of cash assistance and food stamps that the same family would have received in 1996. Put another way, even before taking into consideration the expansion of the remainder of the safety net during the previous 30 years, the Harris plan would pay non-working families more guaranteed cash or near-cash support than they did the year before welfare reform.
The larger worry is that the Harris plan would lessen the incentive to work, meaning that a family’s resources would not expand as much as they would if they worked, in addition to making it easier to get by without getting a job. Expanding the Earned Income Tax Credit, which offers a several thousand dollar work reward annually, is largely credited by economists with being the primary reason for welfare reform’s pro-employment impact. Similarly, the CTC can offer a family with three children up to a $6,000 labour reward. By ensuring that everyone receives credit regardless of job intensity, the Harris proposal would do away with this work reward.
The Harris plan is expected to cause well over a million parents to lose their jobs, with a concentration of damage on single parents. This was the study’s conclusion about the implications of making the 2021 CTC permanent, which I coauthored. Except for an even higher $6,000 benefit for newborn children, the Harris proposal follows the same guidelines and would tend to somewhat amplify the employment loss our study observed.
Voters should take into account other risks besides employment departure. Children’s effects are at least as significant. Short-term child poverty would decrease if more resources were provided to low-income families through Harris’ child allowance. However, leaving their job could eventually rob some kids of resources and negate the non-monetary advantages of having a working parent.
There are genuine long-term risks for children, according to research. A substantial amount of research indicates that work-rewarding tax credits promote children’s academic growth, which translates into increases in employment, income, and self-sufficiency when they reach adulthood. There is little evidence supporting the long-term benefits of government assistance that doesn’t involve labour. Therefore, changing the CTC from a tax credit that rewards work to unrestricted government assistance runs the risk of undoing some of the progress that kids made as a result of welfare reform.
In response, proponents of child allowances would argue that a certain degree of job loss and the risks it poses to children’s future prospects are a fair trade-off for a safety net that offers low-income families with children a minimal level of protection. That is a valid concern.
However, we must remember that we already have a sizable array of support services. A family of four with no income of their own receives about $12,000 in food stamps in addition to benefits from other nutrition programs and free Medicaid health insurance. They are also eligible for cash welfare, energy assistance, and rental housing assistance, though they may not actually receive any of these.
The cost of Harris’ child allowance is the last and possibly most significant issue. Over the following ten years, the plan would cost more than a trillion dollars, according to the Committee for a Responsible Federal Budget. Now is not the time to add even more spending to the future taxpayers’ tab, given the lack of political will to reduce the cost of current government programs to address the $35 trillion national debt. Children, the very Americans the Harris proposal aims to assist, would ultimately be responsible for paying for it in the form of greater taxes and slower economic growth.
The expense of the Harris kid allowance is not justified. In the short term, children would benefit from more resources. However, the financial costs, along with the hazards to parental employment and children’s long-term wellness, make this an unaffordable option. Welfare reform taught us that a safety net that supports work helps elevate families. Families and taxpayers expect us to remember that lesson.
