Missing voices in the Child Tax Credit frenzy — parents

In the last few weeks, we have heard many voices opine about the Biden administration’s first payments under the Advance Child Tax Credit (ACTA), which provides generous benefits to American families to ensure the welfare of our nation’s children.

Politicians, policy analysts, commentators, pundits and journalists have reported widely on the structure of the program — and their opinions of it. ACTA will provide near-universal support for American families. Families with income under $150,000 and single parents with incomes under $75,000 will receive $300 per month for each child under 6 and $250 per month for children 7 through 17, with benefits tapering off for higher earners. The credit is fully refundable — available even for people who don’t owe any income taxes. It is expected that this program will support 65 million American children in 39 million households.

Some have noted, consistent with research — that investments in children are good policy.   A long-standing body of research, by economists such as Nobel Laureate James Heckman, social policy scholars including Michael Sherraden, and child development experts show that investments in ensuring the health, safety, welfare and education of the next generation of citizens — especially the youngest children — are among the highest yielding public policies.   Others have decried the program as a return to welfare, while some economists have noted that the program is unlikely to reduce incentives to work materially. Some commentators have written about the problems with the implementation of the scheme.

There’s one set of voices that we haven’t heard from — parents. As empirical researchers, we have been out in the field working with a national market research firm (J.D. Power) to understand how parents are thinking about this benefit. The preliminary results from our most recent national survey, fielded June 11-14 — a month before the first payments, are encouraging.

Even before the media blitz, parents’ awareness of the credit was already high, with over 60 percent aware of a tax credit that they haven’t yet received. They feel that it will be important to them: More than half of eligible recipients (58 percent) judge that this program will have a large or very large impact on their family finances; another 24 percent judge the impact to be moderate. Surely it will improve the lives of the 10 million children living in poverty, including 14 percent of all American children, 27 percent of all Black children, and 21 percent of all Hispanic children. Yet this is not just about the poor: We find that parents well above the poverty line believe it will materially impact their families.

Some opposed to the plan have written that the money will be wasted, but that’s not what parents are saying. We polled them on their likely uses of the funds, and parents plan to use these funds for essential saving purposes and to balance household budgets. The top four planned uses for the funds — each accounting for more than 25 percent of responses, are saving for kids’ education, direct purchases for kids, paying off bills, and shopping for groceries. More financially stable families are more likely to use the funds for kids’ saving and less stable families for purchases for kids and for groceries; 63 percent of parents expect to have saved some of the credit after a year. Of course, we will have to see if they actually do.

There will be an important debate about whether and how the credit should be extended. We hope that evidence will inform this debate. But equally important, we need to listen to parents and do all we can to make this year’s payments effective. Support by a broader group of stakeholders is needed, for example, to raise awareness through improved and enhanced messaging. Getting the money out is important, but helping parents use it wisely is essential too.

Our survey also shows that 20-32 percent of recipients identify that they’d welcome help opening up accounts for their kids or themselves, getting discounts on items they buy for their children, and setting budgets.

The level of interest in the Child Tax Credit is a testament to the importance of the program.  Let’s listen to the recipients — and work to help them to use the funds to support their families.

Daniel Schneider is professor of public policy and sociology at Harvard University, where he co-directs The Shift Project. Follow him on Twitter @dannyjschneider

Peter Tufano is professor of finance at Oxford University and visiting professor of business administration at Harvard University.