A Child-Friendly Economic Stimulus
As talk of a need for economic stimulus builds, it is crucial that the welfare of America’s children be included in the discussion. Any stimulus package should take into account the specific needs of younger Americans. A child-friendly economic stimulus package would include some, if not all, of the following policy proposals:
Vary any One-Time Tax Rebate According to Family Size
In 2001, the stimulus package passed by Congress included a one-time tax rebate for all taxpayers who had filed fax return in the previous year. That type of one-time tax rebate is generally effective for quickly injecting additional resources into the economy, but it can be a blunt tool. The 2001 rebate, for example, was the same regardless of how many dependent children a taxpayer claimed. This meant that families with no children received the same resource boost as families with many children, despite the fact that families with children are much more likely to have additional costs that require them to spend those additional resources. A far better approach would be to direct a larger rebate to larger families. This year, if Congress passes a stimulus package that includes an immediate tax rebate, that rebate should fluctuate depending on family size.
Improve the Child Tax Credit
In its current form, the CTC provides a tax refund of up to $1,000 for every dependent child claimed by a taxpayer, as long as that taxpayer earned a certain amount of money the previous year (this is called the “income floor”). The more a taxpayer earned, the more refund he or she can claim (again, up to $1,000). The income floor, in place to reward earned income, is currently indexed to inflation, meaning that it rises each year. Unfortunately, in recent years wages have not risen at the same pace. Millions of low-income families have become ineligible to claim the credit as the income floor has risen, and millions more have seen the amount of refund that they can claim reduced significantly. Reducing the income floor from its current level at about $11,000 to $8,500 would mean added benefits to the families of 13 million children, all of whom are the low-income, working families that would be most likely to increase spending as a result of increased resources.Bolster the Low Income Home Energy Assistance Program
By providing assistance to households that spend an especially large percentage of their income on home energy needs, LIHEAP helps these households free some of their resources for more general economic spending. According to a recent study conducted by the program, nearly 40% of LIHEAP households are families with children. Bolstering LIHEAP for families who already receive LIHEAP aid means that at least 1.7 million American families with children will be able to spend more resources on needs other than energy costs. Extending LIHEAP aid to the millions more households that are eligible but do not currently benefit would be even more advantageous, both for America’s families and for the American economy.
Protect Medicaid and SCHIP
Because many states are required to balance their budgets, economic downturns often result in cuts to crucial services like Medicaid and the State Children’s Health Insurance Program (SCHIP). Recent estimates suggest that children benefit from about 1 dollar in every five spent on Medicaid. When states cut Medicaid and SCHIP, children and families face the consequences. When children and families face unexpectedly high medical costs, their ability to contribute to the wider economy collapses. Protecting Medicaid and SCHIP by increasing federal grants to states will ensure that the health of millions of low-income children does not become an obstacle to economic growth.Read the First Focus Analysis: "An Improved Child Tax Credit: Good for the Economy, Good for Kids"
