US Implements 'De Facto Universal' Child Allowance Policy... "Expected to Drastically Reduce Child Poverty"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] As the United States has begun effectively providing families with children about 350,000 won per child per month twice now, an analysis suggests that a groundbreaking change in U.S. child welfare policy is taking full effect.

The Hill reported on the 22nd (local time) that the U.S. child tax credit is "expected not only to significantly reduce poverty but also to change perspectives on welfare and employment recovery methods."

Earlier, under the large-scale stimulus package 'American Rescue Plan Act' passed by Congress in March, the 2021 tax year child tax credit (CTC) amount was increased to a maximum of $3,600 (approximately 4.22 million won).

Specifically, a tax credit of $3,000 (about 3.5178 million won) is provided per child under 18 years old, with an additional $600 (about 700,000 won) credit for children under 6 years old.

Those who filed taxes in the last and previous tax years began receiving monthly advance payments of the child tax credit starting from the 15th of last month.

According to CNBC, a total of $30 billion (approximately 35.17 trillion won) was provided to families with children through two rounds of advance payments last month and this month.

The child tax credit is only available to parents with an annual income of $150,000 (about 170 million won) or less, effectively making it a form of 'universal welfare.'

A report released by the U.S. Congressional Budget Office on the 13th of last month projected that 96% of households with children would receive an average child tax credit of $5,086 (about 5.96 million won) this year under the American Rescue Plan Act.

It is expected that this policy will significantly contribute to reducing child poverty.

The Congressional Budget Office's report anticipated that the expansion of the child tax credit under the American Rescue Plan Act would reduce the proportion of children living in poverty from 13% to 7%.

The think tank Urban Institute recently reported that measures included in the American Rescue Plan Act, such as the expansion of the child tax credit, are expected to lower the poverty rate to 7.7% this year, down 6.2 percentage points from 13.9% in 2018.

Natalie Foster, co-chair of the Economic Security Project, a Silicon Valley organization supporting basic income trials, argued in a contribution to The Hill that "the child tax credit is not just a tax credit but a form of 'guaranteed income' as an 'unconditional allowance.'"

Foster emphasized, "Programs that provide cash directly, like the child tax credit, teach many ways to rebuild the economy," adding, "The child tax credit has the potential to change Americans' views on 'who is eligible to receive money and how to return to the workforce.'"

She added, "If parents continue to receive the child tax credit to help save for their children's college tuition and buy necessities, Congress will not let the current child tax credit expire."

Foster cited the example of World War II when the U.S. invested in universal childcare to include women in the workforce, and although the investment stopped after the war when returning veterans came back, voices emerged from the women who benefited at the time to make it permanent.

The expansion of the child tax credit under the American Rescue Plan Act applies only to this tax year.

The Joe Biden administration has proposed extending it through 2025 in the 'American Families Plan' submitted to Congress, and voices within the Democratic Party are calling for its permanent adoption.

This content was produced with the assistance of AI translation services.