The American Rescue Plan: Cutting Child Poverty in Half

Rupin Thakkar, MD, FAAP
Immediate Past President
WCAAP Board of Trustees

The American Rescue Plan is being called the most ambitious anti-poverty initiative since the New Deal. It is projected to cut child poverty in half, lifting more than 5 million children out of poverty in 2021. Some ways it achieves this: making significant investments in WIC and SNAP, providing rental and utility assistance, expanding the Child and Dependent Care Tax Credit, expanding health insurance subsidies, and expanding unemployment insurance benefits.  The direct stimulus payments of $1400 for eligible recipients with an identical payment for each child has gotten the most attention.  Of note, this includes children in mixed status families, reaching an additional 2.2 million children with social security numbers whose parents do not receive the benefit.

However, by far the largest impact of the American Rescue Plan on child poverty is the expansion of the Child Tax Credit (CTC).  This expansion creates a nearly universal child allowance, or guaranteed income for families with children, for the first time in our nation’s history. This provision alone will cut overall child poverty 45 percent and cut poverty 52 percent for Black children, 45 percent for Hispanic children, and 61 percent for Indigenous children, bringing help to children whose communities and families have been disproportionately hard-hit during the pandemic.

Through the one-year CTC expansion families will receive $3,600 for young children under 6 and $3,000 for children ages 6 to 17. Most significant for children living in poverty, the bill makes the credit fully refundable, meaning families can collect the money as a refund even if their tax bill is zero.  This extends eligibility to 23 million children previously left behind or denied the full value of the credit because their families earned too little.  Prior to this expansion, a quarter of children received only a partial benefit and the poorest 10 percent received none.

The American Rescue plan also includes many other investments for which pediatricians have strongly advocated, including funding for: strengthening vaccine confidence and improving vaccination rates; K-12 education aimed at helping schools reopen safely; postpartum Medicaid extension; mental health care access; the Maternal, Infant, and Early Childhood Home Visiting program; and the Child Abuse Prevention and Treatment Act.

The American Rescue Plan is a historic step forward in reducing child poverty.  However, the provisions are all temporary.  We must demand these measures be made permanent so that they are not simply a one-off response to the pandemic, but a down payment on a long-term commitment to care for our children.  As pediatricians, we witness daily the large role income disparities play in child health, wellness, and future prospects.  While the pandemic has worsened inequalities, our nation has shamefully accepted increasing child poverty for years.  It is time to acknowledge there should never be impoverished children in our wealthy nation, and investment in children is critical to the prosperity and success of our future.

Editor’s note: At the state level, WCAAP members and staff have been instrumental in meaningful contributions to fighting poverty for our state’s children during this state legislative session, in partnership with the Budget and Policy Center. Today, bills supporting a Working Family Tax Credit (aka Earned Income Tax Credit) and improvements to our state’s Temporary Assistance for Needy Families are advancing in the final weeks of the legislative session and we hope to see them to the finish line. Our thanks to WCAAP members Elinor Graham and Tom Long for their ongoing advocacy against childhood poverty in our state.