Now that the dust is settling after midterm election results that surprised many pundits—who had probably not taken into account the sophistication of the US electorate in its understanding that current inflationary pressures and the corresponding drop in the standard of living would not be alleviated by tax and public spending cuts—it’s time to assess what can be achieved in a divided Congress.
Congressional opinions on the role of the federal government in education vary widely, so it’s unlikely that any significant increases in education funding will be approved over the next two years; however, post-pandemic recovery funds should help most states to retain funding levels and implement teacher pay raises in line with inflation. There may also be an opportunity to reinstate the Child Tax Credit, which research suggests will have a more significant positive effect on educational outcomes than any other investment.
Last year, the American Rescue Plan’s expanded Child Tax Credit resulted in the child poverty rate dropping by nearly half to its lowest level ever, as discussed in our October 2022 edition. A few months later, the credit lapsed thanks to the objections of Democratic Senator Joe Manchin, and in January 2022, nearly four million more children were in poverty than a month earlier in December 2021.
Hopefully, a group of Democratic lawmakers may have found a way to restore the credit before they lose control of the House of Representatives to a new Republican majority. They are proposing to support the extension of corporate tax breaks enacted by President Trump in return for Republican support for the expanded Child Tax Credit. This seems like a worthwhile trade, but the tax credit must be available to all families, unlike existing proposals from Manchin and the GOP.
Key to the success of the legislation was that, for the first time, it enabled the poorest families—including those who pay no federal income tax—to receive the credit, which made it much more effective in reducing child poverty.
A group of Republican senators have proposed their own credit, which would leave out the poorest Americans. Mitt Romney’s Family Security Act 2.0 would expand the Child Tax Credit but would offset the cost by cutting important tax benefits for low- and moderate-income families, particularly single-parent families. And, according to the Institute on Taxation and Economic Policy, it would leave one in four children—16.4 million—worse off than they are under current law, including about a quarter of the very poorest children. It would also raise taxes for the average Black household and for two-thirds of single-parent households that file taxes using “head of household” status, who are disproportionately women.
If Congress is unable to reach agreement on this issue, states themselves can take it on. According to a recent report from the Center on Poverty and Social Policy at Columbia University, in almost all states, a refundable state Child Tax Credit of just $2,000 or less—with a 20% credit boost for young children under six—would achieve a 25% reduction (or more) in the state child poverty rate. The report estimates that this would collectively cost states 2.6% of total nationwide state and local revenue under a more universal Child Tax Credit or 1.7% of total state and local revenue under a more targeted approach.
While there is still some momentum, we cannot afford to miss this opportunity to reduce child poverty, the biggest barrier to successful educational outcomes. Let your representatives at all levels of government know how important it is to finally tackle this injustice.
