Next month, millions of American families will begin receiving monthly direct cash payments, and unprecedented foray into the idea of a universal basic income.
A new expanded child tax credit, part of the American Rescue Plan that Congress passed in March, will give low- and middle-income families monthly payouts of $300 per child under age 6 and $250 per child over age 6 beginning in July.
It’s a direct cash benefit with no conditions dictating how the money must be spent. A family with two young children would see an extra $600 a month in their bank account.
Advocates for children and families believe the new tax credit is the closest thing we’ve seen to the concept of universal basic income.
Universal basic income, the idea that the government could reduce poverty by giving cash payments to citizens with no strings attached, left the political fringes a few years ago when then-presidential candidate Andrew Yang made it part of his campaign platform.
It’s gained steam during the pandemic, as some American cities begin experimental cash programs to address income inequality. It’s also garnered a fair share of skepticism, particularly from political conservatives.
Earlier this spring, U.S. Sens. Marco Rubio, R-Fla. and Mike Lee, R-Utah, called the expanded child tax benefit “universal basic income” in a joint statement opposing the measure, citing concerns it would make Americans more dependent on the government.
Meanwhile, child and family advocates are watching to see how the expanded cash benefit impacts families. The IRS estimates the benefit will cover about 88 percent of American children. And researchers at Columbia University estimate that the benefit could reduce child poverty in the U.S. by 45 percent.
“It has the opportunity to be a game-changer,” said Dr. Aisha Nyandoro, CEO of Mississippi-based Springboard to Opportunities. Her organization runs a program called Magnolia Mother’s Trust, which has provided monthly no-strings-attached $1,000 cash payouts to low-income Black mothers in Jackson, Miss., since 2018.
“Our families are used to having punitive aspects connected to their social safety net, and this isn’t that,” she said, referring to conditions typically attached to government safety net programs, such as work requirements.
“I expect (with the new child benefit) families to have the financial resources they need in order to address whatever needs their families have.”
Childcare costs alone can often eat up more than 10 percent of a family’s budget. In Alabama, for example, daycare for an infant costs an average of $500 per month, according to the nonprofit think tank Economic Policy Institute. That’s nearly 12 percent of the median family income in Alabama.
But with no conditions on how the money is spent, families can decide for themselves how to use it. Nyandoro said she has seen participants in the Magnolia Mother’s Trust initiative use their monthly cash benefits to pay debts, childcare expenses, for car repairs or family vacations.
“The reality is that families (with an extra cash benefit) go about taking care of their business,” she said, noting that concerns over how low-income families would spend their benefits can be rooted in anti-Black stereotypes. “Everything you and I do with cash, they would do. They aren’t any different from a typical American family.”
The new benefits are a temporary, year-long expansion of the existing $2,000-per-child benefit. The new expansion under the American Rescue plan also extended benefits to more low-income families who previously didn’t qualify. It’s expected to cost about $150 billion per year, according to the nonprofit Committee for a Responsible Federal Budget.
Families who qualify and who already file tax returns don’t have to do anything to receive the new child tax benefits; it can be directly deposited in their bank accounts. The IRS has said it will open online portals to assist low-income families who don’t normally pay taxes.
Nyandoro said she’s ecstatic about the potential for the increased benefits to help families and hopes the credit will be extended past its current limit of one year. Her organization will be working to make sure low-income families know how to access the money available to them, she said.
“I’m so excited for the stories and narratives that we’ll see about how families are happier,” she said, “and are able to connect more with each other because parents aren’t having to work odd hours or aren’t as stressed.”