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360: Understanding the pros and cons of the expanded Child Tax Credit

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Posted at 10:00 AM, Jul 15, 2021
and last updated 2021-07-15 11:05:35-04

MILWAUKEE — The first payments in the Biden Administration's expanded child tax credits will start rolling out this week. Some parents might even see money hitting their accounts today.

It's a temporary program that some feel should be permanent but, it's also something some tax experts say could encourage people not to work.

To understand different perspectives, we are going 360. We talk to supporters who say the expanded tax credit could help lift kids out of poverty so much that it should remain in place forever. And we hear from others who believe the change could lead to more abuse of the tax system and could keep people from finding jobs. We also hear from a local tax expert who explains who should take advantage of this money and who might be better off leaving the money alone.

360: Understanding the pros and cons of the expanded Child Tax Credit

First, let's break down what's being offered. Heads of households will receive up to $3,600 for each child up to 6-years-old and $3,000 for each 6 to 17-years-old. Half of the credit can be claimed when filing income taxes for the year. But, the other half will be paid in monthly installments from now through 2021. Those payments can be up to $300 per month for kids under 6 years old and up to $250 per month for kids up to 17. The amount of the credit goes down for people earning over $112,000 and households making more than $150,000.

"This helps to put food on the table, this helps to keep roofs overhead, this helps to keep clothes on backs, this helps to pay for things like childcare, these are the types of investments needed to support families," said Cavalier Johnson, President of Milwaukee's Common Council.

Johnson says the need for this extra money is evident due to the impact of Coronavirus stimulus checks.

Krystal Peters, who is a caregiver and mother of 3, agrees.

"Expanding the child tax credit will have a disproportionate on black and brown communities like mine," said Peters.

The expanded child tax credit is set to temporarily cut child poverty in half for six months to one year. In Milwaukee County, according to the US Census, roughly 40 percent of children live below the poverty line.

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Still, some families say a temporary expansion of the credit is not enough.

"It's a temporary fix," said Latisha Johnson, a parent in Milwaukee."It's not enough to maintain households and to me, families with children need more than just that amount of support."

Meanwhile, looking at things from a different perspective is Wisconsin Senator Ron Johnson (R). Here's a full statement:

“In general, I don't like to use the tax code for either economic or social engineering. I think we do a terrible job. I prefer a tax code that was simple, it was rational, that treated all income equally. Things like capital gains, what I would do is I would index out the inflationary gains so people aren't paying taxes on inflation and then just tax the remaining gain offset by losses as ordinary income. Unfortunately, when we reformed the tax code, we reformed it, we didn't really simplify or rationalize it a whole lot. I think that was unfortunate, so in general, I just don't like all of these credits, all of these special deals. It would be a whole lot easier if we just had a completely flat tax structure, no credits. Only deductions for legitimate business expenses and then it's a simplified tax code that treats all income equally. I'm not a real fan of any types of credits, quite honestly, although that's the system we've got. I just want to make sure it's administrated fairly.”

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Republican U.S. Congressman Glenn Grothman has concerns, too.

"You want to make sure that it's not being abused. I mean if the government is going to start writing checks for somebody with three kids and nine thousand dollars per year, obviously the incentive to do something wrong is great. We’re going to have to make sure to see that that doesn’t happen," said Grothman.

He also says he worries that this could become another government program that discourages people from seeking work.

Sachin Chheda with the Economic Security Project doesn't think that will be the case.

"It is something that will make a huge difference in families in terms of meeting budget to pay bills. maybe put a little bit aside to repair the car or get a window fixed, but it's not enough to live on," said Chheda.

TMJ4's Ryan Jenkins asked Jaquilla Ross, owner of Ross Financial and the President of the Milwaukee branch of the National Black Accountants Association (NABA) what parents should know moving forwards.

"Depending on your tax situation, you need to consult with a professional to see if this is a good idea or not," said Ross. "If you're one who is always close to owing each year, I do not recommend you take the advanced payment. If you're someone who may get a huge refund every year, It might work out for you to take the advanced payment."

According to the IRS, To qualify for advance Child Tax Credit payments, you — and your spouse, if you filed a joint return — must have:

  • Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
  • Given us your information in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool; and
  • A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and
  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
  • Made less than certain income limits.

CLICK HERE to visit the IRS website for more information on the Child Tax Credit.

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