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Census Figures Underscore Need to Help Poorest Age Group: Young Children

Some 17.3 percent of children under age 6 were poor last year, our analysis of Census data released yesterday shows — notably higher than older children or adults (see chart).  (Our figures are based on the Supplemental Poverty Measure, which counts both cash and non-cash government benefits.)  That the nation’s poorest people are babies, toddlers, and kindergarteners shouldn’t be acceptable — and policymakers can help by boosting the Child Tax Credit (CTC) for very young poor children, many of whom receive little or nothing from the credit now.

Beyond the short-term benefits of reducing child poverty, boosting the CTC for the poorest young children may reduce various poverty-related risks that can limit young children’s brain development, with long-term consequences.  As a report from Harvard’s Center on the Developing Child explains, the early years of life are a “period of both great opportunity and great vulnerability.”  Research suggests that raising families’ incomes can result in healthier, better educated children with greater earning power as adults:

  • Improved health.  Infants born into families that benefited the most from 1990s expansions of the Earned Income Tax Credit (which shares key design features with the CTC) had the greatest improvements in birth weight, an important factor for future health.
  • Better school performance.  Programs that lift family income starting when children are ages 2 to 5 boosted their later academic achievement, a study of 16 demonstration projects in the 1990s found.  A related study found that for every $3,000-a-year increase in family income during the preschool years, poor children made additional academic progress equivalent to about two months of extra schooling.
  • Higher lifetime earnings.  Another notable study found a link between higher income during childhood and greater earnings and employment in adulthood. Children in low-income families that experienced a $3,000 increase in annual income between the children’s prenatal year and fifth birthday earned an average of 17 percent more as adults, and worked 135 hours more annually, than similar children whose families’ incomes didn’t increase, the study found.

Under current rules, families with incomes up to $3,000 are ineligible for the CTC, and the credit phases in slowly for families with incomes above that threshold.  Families with two children don’t receive the full credit of $1,000 per child until their earnings reach $16,333.  As a result, children in the poorest working families get no CTC and many other children in deep poverty, with incomes below half of the poverty line, get only a partial tax credit.  

By making the full CTC available to all low-income children — in tax parlance, making the credit “fully refundable” — policymakers could boost young children’s potential to succeed in life.

Chuck Marr
Vicepresidente de Política Tributaria Federal