If you are a parent, you can expect some extra money beginning July 15, as the Internal Revenue Service (IRS) rolls out an expanded tax break for millions of families known as the Child Tax Credit.
Parents will get a monthly payment of as much as $300 per child for children 5 years old and younger.
The payout for the newly-revised Child Tax Credit is up to $250 per month for each child ages 6 through 17. That expanded credit is worth up to $3,000 per child a year. The credit offers an extra $600, which would provided up to $3,600 for each child 5 and younger.
About 39 million households — which would cover 88% of children in the United States — are set to begin receiving monthly payments in 2021 without doing anything, the IRS said Monday morning.
One economist is concerned about the impact of the credit not only on the country, but also Indiana.
“So the government is taking money from your pocket and putting it in your other pocket because 92% of the families are going to get a check as a result of this. I can’t fathom the reason behind this,” said Matt Will, economist and professor at the University of Indianapolis, in an interview Tuesday morning with 93 WIBC’s Tony Katz. “We’re doing it with a tax credit on just having children, so just giving birth gives you money from the government rather than having people work to get that money.”
Many states, like Indiana, have ended their participation in federally funded pandemic unemployment programs. That means an end to the $300 add-on to recipients of unemployment insurance under the Federal Pandemic Unemployment Compensation program. Will believes that is being more than canceled out with the addition of the child tax credit.
“We’re going to remove that $300, but throw in another $3,600. That’s per year obviously, but we’re just going to extend the problem by removing one giveaway for another giveaway,” said Will.
Will predicts that it will be worse in Indiana than other states.
“The reason (it will be worse) is our cost of living is lower and our average wage is lower. So $3,600 to a Hoosier means a lot more than $3,600 to someone from New York City. It’s going to hurt us more from a ‘trying to find an employee standpoint.’ You’re going to have a tougher time finding frontline service workers when you’re getting $3,600 for each child that you have,” said Will.
The Child Tax Credit itself gets more complicated depending on your situation.
If divorced, for example, only one parent can claim the credit for a child. The child must live with you for at least six months out of the year.