Economic stability and security for children and their families are the best predictors of a child’s well-being. Many programs that alleviate poverty have been shown to improve a child’s birth, health and educational outcomes. In recent years, countries such as England and Canada have taken bold action to reduce child poverty, and organizations such as NASEM have put forth realistic plans to reduce child poverty in the United States by 50 percent in 10 years.
Policy: Children’s Savings Accounts
Background on Policy
Parents across the country are struggling to meet monthly expenses like child care, rent and utility bills; afford the cost of college; and help their children have a strong start in life.
To that end, during consideration of the 2017 tax legislation (P.L. 115–97) by the Committee on Finance, Senator Casey authored an amendment directing $500 per year towards a college savings account for children in families earning under $100,000. Senator Casey secured a vote on his proposal, but despite the support of every several states and countries have adopted programs to establish and help fund children’s savings accounts, including Nevada, Rhode Island, Maine and Pennsylvania., This proposal is more expansive and comprehensives than the existing state programs, and also expands the types of eligible expenditures.
Senator Casey believes that no child’s future should be limited because their parents are not wealthy. Every child should have the opportunity to reach her or his potential and no child should be limited by poverty. This proposal is an investment in their future.
The proposal would establish a children’s savings account for every child whose parent(s) or guardian earns under $100,000 per year. Deposits of $500 per year will be made for qualifying children at tax time. Parents, friends and family members can make additional contributions at any time. Parents and guardians who qualify for the Earned Income Tax Credit (EITC) will be eligible to receive dollar-for-dollar matching contributions of up to an additional $250 per year. Through this program, parents will also have the ability to establish their own emergency savings account.
Up to half of the funds in a children’s savings account can be used to pay for post-secondary education. After a person turns 26, or following graduation from a 2- or 4-year program or receipt of a professional credential, funds may be rolled over into an IRA account, used to start a business or buy a home in the name of the account beneficiary. Funds from the savings account may be rolled over into an Achieving a Better Life Experience (ABLE) account for individuals with disabilities at any time.
The Department of the Treasury and the Internal Revenue Service will work in coordination with the Centers for Medicare and Medicaid Services to ensure youth in foster care have accounts established on their behalf, and that youth are informed that such accounts have been established in their name.
Expected Impact of Policy
In 2016, 48.3 million children lived in households earning less than $100,000 per year. Depending on years of eligibility, children could begin their adult lives with up to $9,000 in savings to help pay for post-secondary education, start a business, buy a home or save for long-term retirement. This is a down payment on the future of the children of our country.
Policy: Child Tax Credit/Children’s Allowance
Background on Policy
The Working Families Tax Relief Act and the American Family Act would expand and improve the Child Tax Credit (CTC) for families and workers across the country. Both bills were introduced by Senator Sherrod Brown and Senator Michael Bennet and enjoy broad support from the Democratic Caucus.
The American Family Act (Bennet-Brown) creates an expanded Child Tax Credit for children under 6. The bill would create a new Young Child Tax Credit that would provide $300 per month ($3,600 per year) for parents with children under 6 years of age, compared to the current level of $2,000 per year under the CTC. It also increases the maximum CTC from $2,000 per year to $3,000 per year for children 6 years of age or older.
The Working Families Tax Relief Act (Brown-Bennet) expands both the EITC and the CTC, and like the American Family Act, establishes a child allowance. The bill makes the current $2,000 CTC fully refundable and creates a $3,000 younger children credit. The bill allows the CTC to be taken monthly rather than annually.
Expected Impact of Policy
According to the Center on Budget and Policy Priorities, 4 million Pennsylvanians (1.6 million Pennsylvania families) would benefit from the Working Families Tax Relief Act, including 1.7 million children. The bill would lift 7 million people and 3 million children out of poverty nationally. The Columbia University Center on Poverty and Social Policy recently released a report that found the American Family Act would cut child poverty by 38 percent. The 2019 NASEM study recognized that a robust child tax credit coupled with an expanded child care tax credit that supports working parents, along with a larger EITC, would have a significant impact on reducing child poverty.