ANGOLA — Being able to send her daughter to a quality day-care facility and remain in the workforce has always been important to Hayley Smoker.
With the Child Tax Credit being implemented through the American Rescue Plan that was signed into law March 11 by President Joe Biden, Smoker said the extra money for at least six months of this year will make sending Onnalee, 19 months, to day care much more affordable.
Hayley and husband Nate Smoker will be sharing in millions of new Child Tax Credit money that will potentially be flowing into northeast Indiana this summer and fall.
“We pay a lot of money for child care. What are we supposed to do,” Hayley said.
The usual Child Tax Credit is $2,000 a year. Under the American Rescue Plan, the credit increases by $1,600 per child for those 5 and younger and by $1,000 for those ages 6-17.
Unlike the standard Child Tax Credit, parents may start receiving monthly checks as part of the American Rescue Plan instead of having to wait until tax time to claim the credit. The checks will run from July through December.
For children under 5, the monthly check is $300. For children ages 6-17, the check is $250 a month.
More than 93% of children in the country, approximately 69 million, are expected to receive benefits under the plan at a one-year cost of more than $100 billion, data from the White House said.
“In the short term, the package should hopefully have a strong positive impact on the families receiving checks, especially those living at or below the poverty line. There are undoubtedly large gains to improving the lives of children by helping their parents to buy essential supplies such as diapers, books and daycare services,” Joshua Bernstein, an Indiana University economist, told KPC Media.
For the Smokers, who live in Fremont, it means paying for part of Onnalee’s day care and maybe taking the $300 a month that would have gone to tuition and putting it in the mutual fund they have to save for their daughter’s future.
“I send her to The Vine (Montessori school, Angola) because it’s the best the area has to offer. It’s also the most expensive. That (check) will allow us to pay for about half of her tuition,” Haylee said. “This is incredible. It keeps people working.”
One of the goals is to make sure parents have the financial resources available so they can either remain in the workforce or return to the workforce.
“The sizable check amount partially reflects the severity of the economic environment, in which many parents will have either lost their jobs or have faced reduced hours of work in the past year. In addition, the new package aims to make benefits for families with children more universal and less tied to the income of parents,” Bernstein said.
Demographic data from the annual Kids Count report produced by the Indiana Youth Institute indicates the amount of money that will be distributed in northeast Indiana in the form of monthly checks could have significant impact. In Allen, DeKalb, LaGrange, Noble, Steuben and Whitley counties — the six-county KPC Media Group readership area — there are approximately 146,478 children under age 17. Of that, 42,460 are 5 or younger.
Based on those estimates, which are from 2019, the most recent statistics available that were presented in the January 2021 Kids Count report, approximately $47.7 million could be distributed to families in the six-county area per month. For the six-month period the program is supposed to run, that comes out to about $286.5 million.
“We hope that the stimulus bill will have the positive impact on child poverty that many are predicting. We will be watching the data to gauge impact in the coming months,” Margaret Duxbury of IYI said.
But if it becomes permanent, as Democrats intend, it will greatly enlarge the safety net for the poor and the middle class at a time when the volatile modern economy often leaves families moving between those groups, said a report published last week in The New York Times.
In the six-county area, child poverty varies greatly, Kids Count data says, with nearly an 11 percentage-point-gap between the lowest and highest poverty rates. In LaGrange County, 5.8% of the 12,844 children 17 and younger live in poverty. The high was Allen County with 19.6% of its 96,307 children living in poverty. Next was in DeKalb County, with 18.5% of its 10,472 children living in poverty. Noble County had 8.6% of its 11,988 children living in poverty. In Steuben County, 15.8% of its 7,069 children were living in poverty. Whitley County had 16.8% of its 7,798 children living in poverty.
Statistics produced by the Biden administration provided by email to KPC Media said the new funds will go to the families of 1.5 million children in Indiana, lifting some 80,000 children out of poverty. However, definitions of what constitutes poverty vary.
That’s the message Steve Hoffman likes to hear. Hoffman is the president and CEO of Brightpoint, a nonprofit public assistance agency serving northeast Indiana. He sees the program as going much farther than the traditional Child Tax Credit, which provides money once people file their income taxes.
“From Brightpoint’s perspective we are definitely pleased with these tax credits. They’re going to help low income people substantially,” Hoffman said.
Hoffman said about 12% of Hoosier children live in poverty and that rate jumps to close to 20% for the northeast Indiana region served by Brightpoint.
“Any help we can give, especially during these times — increasing numbers of families are struggling to have their needs met or meeting their own needs because of being laid off, losing some hours and so forth — people are really struggling, so these tax credits are going to help families, particularly where we need to help families the most, and that’s with children,” Hoffman said.
With the Child Tax Credit program prior to the American Rescue Plan, a credit of up to $2,000 per child under age 16 was provided. The problem for people in extreme poverty was that they don’t earn enough income to pay taxes that would generate a refund. So that benefit does not help them.
“This has a great potential to assist the families, especially with those who might be single parents who are struggling to provide healthy child care, pay expenses for needs for the children, to begin to start a savings which could be used for medical care (prescriptions, as an example) and allow the parents to not have to work as much,” said the Rev. John Boyanowski of the Pleasant Lake United Methodist Church.
The money reportedly will be distributed in the form of checks or direct deposits from the Internal Revenue Service. The monthly checks will put money in the hands of parents without having to wait until tax time next year.
The American Rescue Plan caps the eligibility to receive the benefit at $150,000 for couples filing jointly. After that level, the money is reduced by $50 per $1,000 increment of additional income, phasing out at $170,000.
Boyanowski said he hopes the parents who receive the benefit — whether they’re considered low income or moderate income — will use the additional money in their pockets as intended.
“This has the potential to help out; as long as the parents are disciplined to use it for the same purpose,” Boyanowski said.
Some might spend the money on treats that had not been attainable before. And others might spend the money on creature comforts.
“The possibility is always there; however, I believe most will use it as intended. Only those who are abusing the system now will do the same with this. Most people are honest and caring, especially for their children,” Boyanowski said.
Some Democrats would like to see the additional Child Tax Credit become permanent like other countries — such as Canada, Great Britain, Norway and others, reportedly some 17 so-called rich nations — that subsidize child rearing for much of their populations.
Republican Sen. Mitt Romney of Utah had been pushing for such a measure before the American Rescue Plan was promoted by the Biden administration. He has proposed making the Child Tax Credit $4,200 a year while eliminating other programs that provide aid.
Bernstein said it will be important for the government to watch how the program progresses, particularly if it is extended beyond 2021.
“Over the longer term, it will be important to track how the package continues beyond 6 months, if at all,” Bernstein said.
Detractors to the plan say it could provide an incentive to not work or it could encourage some parents to have additional children.
“Ultimately, while assisting families in the short run should have important benefits, over the longer term there are potential costs associated with disincentives to working if parents receive substantial assistance checks without requiring employment, even as the economy recovers. Furthermore, these disincentives could hamper the economic recovery to some extent if people prefer to remain unemployed while still receiving the checks rather than looking for employment or increased hours,” Bernstein said.
Like many families contacted for this story, the Smokers had heard about the $1,400 stimulus checks but were unaware of the Child Tax Credit expansion.
During the height of the COVID-19 shutdown last year, both Hayley and Nate Smoker were furloughed. It created a struggle, particularly with a baby, but they emerged stronger and are looking forward to a bright future now that the pandemic seems to be easing its grip.
“This is amazing. This is going to be a big help for us,” Hayley said.