One vital element of the national economy recovery package now before Congress should be of particular concern to Mainers. To provide the necessary stimulus, economists across the political spectrum agree that money provided to low-income people will be used immediately to buy food, pay rent and utility bills, and cover health and child care expenses.
Most of the commentary about the recovery package has emphasized shovel-ready projects and investment, and those things are important. But without more consumer spending, the economy will remain in the doldrums.
The Child Tax Credit, which gives parents up to a $1,000 per-child benefit, is one of the best tools for increasing spending. It rewards hard-working families, many of whom are struggling during the current recession, while providing a vital boost to the economy. Conservative economist Mark Zandi of Moody’s Economy.com estimates that for every dollar spent by the federal government on credits such as the CTC, $1.22 flows immediately into the economy.
Increasing the number of children who receive the credit and the amount of money they receive should be a priority. The plan passed last month by the House of Representatives goes further toward that goal than the plan initially considered by the Senate.
Maine’s Sen. Olympia Snowe has been a longtime leader for the CTC. She played a key role in its creation and pushed for a temporary expansion last year. She and her colleague, Sen. Susan Collins, should do everything in their power to ensure the credit is further expanded to help our nation’s children.
The House plan would for the first time allow families without any earnings, no matter how small, to claim at least a portion of the credit. This is crucial during a time when many families are losing jobs, exhausting unemployment benefits and depleting their savings.
In Maine, the House plan would result in 54,000 more children becoming eligible or receiving an increase in the credit. Maine families would receive an average of $106.
Under current law, earnings in 2008 must exceed $12,500 for a family to qualify. The credit is 15 percent of the amount exceeding $12,500. If the family’s earnings are $500 above the threshold, they would receive $75. If they owe no taxes, a portion of the credit is still refunded. If they earn below the $12,500 threshold, and many families do, they receive nothing.
The House plan would waive the earnings limit for two years so that workers could receive a partial credit. Families with two children who earn $14,500 a year could receive $1,000 credit for each child. That money could be used to help pay for a quality child care program, which is vital for low-income parents who work but do not qualify for state subsidies.
Some Republicans balk at the idea of giving a tax cut to people who don’t earn enough to pay income taxes. But the same workers are subject to a 7.6 percent payroll tax no matter how small their earnings. Census data show that 70 percent of children who would benefit from the CTC live in families in which a parent works 30 or more hours a week, at least 50 weeks a year. The majority work in low-paying jobs that provide critical services, such as caring for the elderly or teaching young children. Taxes do consume a big chunk of their paychecks whether they pay income taxes or not.
As more parents lose jobs during the recession, children will suffer most. Without a turnaround, the number of poor children is expected to increase by as much as 3.3 million and children in deep poverty will increase by 2 million, according to an analysis by the Center on Budget and Policy Priorities.
With unemployment in Maine rising to 7 percent in December, a loss of 3,400 jobs per month, this forecast appears all too real. By expanding the CTC, many children can be buffered against the devastating effects of poverty when their parents lose jobs.
The economic recovery package’s purpose is to create jobs and pull the country out of a deepening recession. Fortunately, one of the best ways to achieve that goal is by helping those who are hurting most.
Elinor Goldberg is president and CEO of the Maine Children’s Alliance.