America’s income gap, the difference in annual earnings between those at the top of the economic ladder and those at the bottom, is the greatest it's been in more than a half-century. The nation’s wealth gap is even greater. The bottom 50% of Americans hold just 1% of the nation’s wealth. The top 10% hold 70%, of which the top 1% accounts for 32%.
In 2017 the Trump administration and a Republican Congress made tax changes that increased the gaps. Some of the changes, the biggest drop in corporate tax rates in history, for example, benefited the 10 % of Americans who own 84% of stocks. That change was noticed. Changes to the federal child tax credit, which shifted more money to the upper middle class than the poor, slid through the shadows.
Earlier this month, The New York Times published a story with the headline, “Tax Credit for Children, Except the Ones Who Need It Most.” The story, by reporter Jason DeParle, explained that Trump’s tax reform made households with incomes up to $400,000 for married couples eligible for up to a $2,000 per child tax credit. Unlike a tax deduction, a tax credit comes right off the top. Owe Uncle $5,000 but have two $2,000 child tax credits? Pay $1,000.
Republicans structured the tax credit so that the higher an eligible family’s income, the bigger the credit. Minimum-wage workers saw their per-child tax credit increase by just $75. In the nation’s poorest counties, the Times reported, more than half of all parents earned too little to get the full $2,000 per-child benefit.
Nationally, 35 % of households had incomes too low to receive the full credit. A single parent with two children would have to make $30,000 to qualify for the $4,000 credit, which is partially refundable. Parents who earn enough to qualify but owe little or nothing in taxes can get up to $1,400 back as a refund that again is based on earnings. A policy of giving more to families that need less help makes no sense. Giving the full-benefit to poor households would reduce childhood poverty by 25 % or more.
Study after study has found that children who grow up in families with less financial stress, more stability, less hunger and access to at least some of the enriching experiences middle-class children are afforded, do better in school, earn more, pay more taxes as adults, and cost society less in social services like drug treatment and incarceration.
Democrats, with support from some Republicans, have filed several bills that would grant the full tax credit, or in some cases, even larger credits, to low-income families with children. It’s impossible to assess, in the chaos that is Trump’s Washington, what the odds are that bills that provide more help for the poor will become law. In fact, the trend, given the administration’s threatened cuts to the nation’s food stamp program, is in the other direction.
A child poverty rate of just under 20 % placed the United States 34th among developed nations, according to the United Nations Children’s Fund, behind not just Scandinavian and European nations and Canada, but Mexico, Poland and Latvia. Increasing the child tax credit and making it equally available to all families below a household income level of say, $200,000 or $300,000 would dramatically lower the poverty rate. It would also, and this is why generous credits deserve universal support, brighten the future of millions of children and strengthen the nation. Please give the effort your support.
This editorial first appeared in the Concord Monitor on Dec. 29.