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Tax Credit Could Lower Child Poverty More In 2021 Than Any Other Year In U.S. History


President Biden is likely to sign the $1.9 trillion American Rescue Plan this week, and supporters are already cheering the relief that this bill will bring to children. Our next guest says one provision in particular will lead to the most substantial one-year reduction in child poverty in U.S. history. Indi Dutta-Gupta of the Georgetown Center on Poverty and Inequality joins us now.


INDIVAR DUTTA-GUPTA: It's great to be here again with you, Ari.

SHAPIRO: So this provision we're talking about is the expanded child tax credit. Explain how this is likely to reduce child poverty so much. I mean, how many kids are we talking about?

DUTTA-GUPTA: Look. We're talking about 66 million kids getting more money. We're talking about several million kids who now live in poverty being kept out of poverty. And the gist of the new policy is an increase in the child tax credit of up to a thousand dollars per child, and then an extra $600 on top of that for children under the age of 6. But the really big anti-poverty component here is that we would for the first time allow workers with the lowest earnings - those who have lost their job and have struggled in this tough, tough labor market to have even modest earnings - we would allow them to get the maximum credit for their kids, and that would just be life-changing for many of these children and their families.

SHAPIRO: Explain who qualifies. What's the cutoff?

DUTTA-GUPTA: Well, basically, what the policies would do is they would allow the vast majority of families to access the child tax credit. This is reasonably well targeted in that the increases now are going to go to families with the lowest incomes, but it does really spread out benefits throughout the income spectrum. The Institute on Taxation and Economic Policy has just estimated that the bottom 60% of Americans by income would receive an increase in their incomes of 11% on average, and then the bottom 20% would receive an increase of 33% on average. So we are living through one of the largest boosts to family incomes, I think, that may have ever happened, at least at this pace, in U.S. history.

SHAPIRO: And this is an idea that's been around for decades, so why do you think this is the moment it's finally happening?

DUTTA-GUPTA: Yeah, this idea has been around for decades. Plenty of our peer countries - wealthy countries in Europe, even Canada and elsewhere - have had a child allowance or child benefit. I think there's growing appreciation for the fact that when people don't have earnings from work, it's not necessarily their fault. Right now, we are arguably 12 million jobs short of where we would have been had the pandemic not hit. We have not seen a labor market this weak in generations.

SHAPIRO: Is there an argument that this could have been more targeted? I mean, if these tax credits are going to families that make six figures, is it as effective as it could be if it were a little more narrowly tailored?

DUTTA-GUPTA: Well, I don't think that the tax credit is less effective if it's not as narrowly tailored. But of course, there's a question if that money going to higher-income households could be better spent elsewhere. That's an open debate and conversation to have. But remember, one of the reasons why I think these policies do have some widespread support is they're fairly easy to administer, in this case through the IRS, and they reach a large share of households. So a lot of people are going to benefit here, and that could help it politically.

SHAPIRO: Opponents of this measure tend to object along the lines of give people a hand up, not a handout. How do you respond to that?

DUTTA-GUPTA: I mean, the truth is, in America, we are constantly telling people to pick themself up by their bootstraps, and people don't even have boots. Getting by in this country with such little cash is overwhelming. It overwhelms the mind. It overwhelms the body. And we are buying people just a bit of relief and some freedom so that they can make the best decisions for their families, both on how they spend their money and on how they spend their time, including with their own children.

SHAPIRO: Indivar Dutta-Gupta is co-executive director of the Georgetown Center on Poverty and Inequality.

Thank you for talking with us.

DUTTA-GUPTA: It was a pleasure, Ari. Transcript provided by NPR, Copyright NPR.