To reduce poverty, stop burdening the poor: What Joe Manchin gets wrong about the child tax credit
A permanent expansion of the Child Tax Credit is the heart of President Biden’s plan to reduce poverty. The CTC’s temporary expansion has already drastically cut child poverty and food insecurity, but these gains are under threat. Sen. Joe Manchin (D-W.Va.) wants to add work and education requirements. Our research has shown that such requirements will neither promote work nor education, but instead become administrative burdens that block government benefits from reaching those who need them most.
How does the expanded CTC work? The American Rescue Plan made two major changes to this long-standing program. First, it made the value of the credit more generous. Second, it made it fully refundable, meaning that families with very low incomes can claim the full value of the credit.
Manchin has expressed concern about the new CTC: “Let’s make sure we’re getting it to the right people. There’s no work requirements whatsoever. There’s no education requirement. Don’t you think if you want to help the children, the people should make some effort?”
Manchin’s proposal exemplifies how policymakers routinely add administrative burdens to weed out the “undeserving.” But let’s be clear about who “the right people” are for the CTC: it is kids trapped in poverty through no fault of their own.
If we truly want to “help the children” we need only answer two simple questions. First, is the expanded CTC reducing poverty? Second, what will adding Manchin’s proposed requirements do to its effectiveness?
The answer to the first question is that the expanded CTC has been extraordinarily successful. The first round of new CTC payments was launched in July, and had an immediate effect. Child poverty declined from 15.8 percent to 11.9 percent. Child hunger also declined, with the share of families earning less than $50,000 who reported not having enough to eat dropping from 26% to 18.5%.
The long-run effects of the CTC will be transformational if recent changes are made permanent. An analysis by the Urban Institute finds that in a typical year, the expanded CTC would reduce child poverty by 40 percent. The effects would be even greater in Manchin’s West Virginia, where child poverty would be cut almost in half, from 13.8 percent to 7 percent. The CTC would also help to dramatically reduce the increased risk of poverty that Black and Latino kids face relative to their white peers.
The answer to the second question is also clear: adding requirements to the CTC means fewer children would be helped, and those in the most intense poverty would be most likely to lose out.
In our book, we document how administrative burdens reduce the reach of the safety net, limiting take-up of social programs. By contrast, the CTC has been a success: 94% of children in eligible families are receiving the benefit. Minimizing burdens has been the key to this success. Rather than asking families to complete new applications, they are automatically enrolled based on their tax data.
Policymakers should look for ways to reach the millions of children in eligible families not receiving the CTC, rather than adding requirements that will exclude millions more. Work requirements will hurt families in the most intense poverty, as well as creating confusion and new hassles. Complex demands, such as documenting educational participation, will further decrease take-up as families struggle to deal with unfamiliar paperwork.
Helping families to improve their lot in life through work or education are worthy goals. But attaching work or educational requirements to the CTC will have the opposite effect. Poor families already have strong incentives to work. The Treasury Department estimates that 97% of families receiving the CTC are working. Other important social programs already include work requirements, most notably the Earned Income Tax Credit.
We have clear and mounting evidence that work requirements don’t work: they do little to encourage labor force participation, but dramatically reduce take-up. By contrast, investments in kids do work: they provide a cushion that allows single mothers to get child care, increasing labor participation, and in the long run result in the kind of educational outcomes and social mobility than Manchin says he wants.
The United States is at a crossroads when it comes to our safety net. It’s not just about generosity, it’s also about access; will help be bound in red tape or will it actually be accessible? Adding work requirements to the CTC may sound reasonable in the abstract, but in reality it represents a political choice to leave millions of children mired in poverty.
Pamela Herd (@pamela_herd) and Donald P. Moynihan (@donmoyn) are professors at the McCourt School of Public Policy at Georgetown University and the authors of “Administrative Burden: Policymaking by Other Means.”