(Bloomberg) -- Millions of American families on Friday are going without a monthly benefit introduced by the Biden administration last year that many came to depend on amid a surge in the cost of living and the continued spread of Covid-19.
It’s the first in what could be a series of missed payments unless Democrats can make headway on legislation carrying President Joe Biden’s signature economic proposals that’s now stalled in Congress.
The expanded child tax credit -- worth up to $300 per child per month -- saw its last monthly payout in December, despite Democrats’ pledges that they would be renewed for years to come. With Congress deadlocked, parents could be waiting months for the next payment to arrive, if it comes at all. That’s amid school closings, the omicron variant and surging prices for groceries and other household staples.
Tiffany Pearson, an Arizona mother of five children ranging in ages from 5 to 14, predicts several lean weeks until she can get the tax refund she expects in February or March. Pearson, who homeschools her children, said the monthly tax-credit money largely went for school supplies and clothing for her kids, who are “growing like weeds.”
Pearson says she’ll need to make the annual tax refund stretch for months to supplement her income delivering takeout food orders for DoorDash and UberEats.
“I don’t necessarily need a giant lump-sum at the end the year,” Pearson, 39, said. “It’s throughout the year that everybody struggles.”
The child tax credits payments amounted to about 1% of household income nationwide, according to research from JPMorgan Chase & Co. About 9.9 million children will be at risk of falling back, or deeper, into poverty without a renewal of the tax credit, according to the Center on Budget and Policy Priorities, a left-leaning think tank. Some 36 million families received the credit, according to the Treasury.
House Ways and Means Chairman Richard Neal says he’s optimistic that his party can successfully cut a deal with Senator Joe Manchin, who unexpectedly said in December he couldn’t support Biden’s signature economic legislation -- which includes the stepped-up child tax credits -- as written, partly because of concerns that the credit was too generous. Manchin has also said he’s worried that the credit could further fuel inflation. Democrats have made almost no headway at reaching an agreement in the past month since Manchin’s announcement.
Without congressional action, the child credit reverts this year to a $2,000 per child benefit, down from up to $3,600. Additionally, parents won’t see that money during 2022 -- they will only be able to claim it on their tax return when filing season comes early next year.
Another blow from the reversion: some of the lowest income households don’t qualify for this smaller version of the credit, because they don’t make enough money.
“There is significant energy from Democrats in both chambers and the White House to get this over the finish line. American families cannot afford further inaction or delay,” Representative Suzan Delbene, a Washington Democrat, said in a statement Friday marking the first missed monthly child tax credit payment.
Nicole Rosen, who owns Boundless Advisors, a tax preparation company, said that rental prices in her area in the Wenatchee Valley in Washington state have increased about 20% in recent years and that food stamps haven’t kept up with the pace of inflation. The tax credit has been a safety net for those taxpayers, she said.
Rosen, who also received the credit for her 15-year-old son, said families could continue to struggle through Feb. 15, when the IRS can start processing tax refunds for lower-income households that claimed the earned income tax credit. She said the gap between Dec. 15, when the final monthly child credit payment went out, to mid-February will be a stretch for many families who had begun to build the monthly payments into their budgets.
Read More: Tax Season Opens Jan. 24. Treasury Says Be Ready for Frustration
“This is devastating for families,” said Bruce Lesley, president of First Focus on Children, which has advocated for the expanded child tax credit. “This disruption is creating a chaotic situation, particularly for lower-income families. Many have come to rely on it as a huge piece of how they are making ends meet.”
©2022 Bloomberg L.P.