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Child tax credit will have massive footprint in NM

Jocelyn and Christopher Lobato hold their 1-month-old daughter, Athens. The young family will benefit from the expanded child tax credit that was part of the $1.9 trillion coronavirus relief package. (Roberto E. Rosales/Albuquerque Journal)

Copyright © 2021 Albuquerque Journal

Jocelyn Lobato sees the expanded child tax credit as a lifeline for her young family.

Lobato, 28, and her husband, Christopher, 27, had their first child last month. They took out a mortgage on a new home late last year, and they have a monthly payment on a pickup truck.

They don’t hug the poverty line – Lobato said that between her work as an aesthetician and her husband’s career as a firefighter they make about $75,000 a year. But they still have worries.

What would happen if there were an unexpected medical bill? Can they afford private school one day for baby Athens? What about college?

Like most New Mexico families, the Lobatos will be getting extra money in the coming months from the expanded 2021 child tax credit included in the American Rescue Plan. And they stand to gain even more if efforts underway by some members of Congress to make the child tax credit expansion permanent are successful.

Jocelyn Lobato holds her baby daughter, Athens. Lobato sees the expanded child tax credit that was part of the American Rescue Plan as a lifeline for her young family. (Roberto E. Rosales/Albuquerque Journal)

The 2021 benefit, which was part of the $1.9 trillion coronavirus relief package, will provide a couple with one child under age 6, and a household income of $150,000 or less, periodic payments totaling $3,600 per year, or $300 per month. Families with children 6 through 17 would receive a credit of $250 per month, or $3,000 per year per child.

The payments will be phased out for couples making more than $150,000, heads of household making more than $112,500 or single parents making more than $75,000.

“It’s a nice little sense of security and backup,” Lobato said. “An extra $300 means … not having to pick if we’re going to buy groceries this month or put money away for her college. That’s a really hard pick. How do you do that?”

Sen. Martin Heinrich, D-N.M., said he’s trying to move the payments into 2022 and beyond. Last week, he was trying to get lawmakers to sign a letter signaling to the Biden administration that intention.

“Some have called this expansion of the child tax credit a sort of children’s version of Social Security because of what it will do to lift children and their families out of poverty,” Heinrich said.

The efforts by Heinrich and others who want the child benefit to continue in perpetuity will likely run into some opposition.

No Republican lawmakers supported the American Rescue Plan. Republican Sens. Mike Lee of Utah and Marco Rubio of Florida have released their own plans for expanding the credit that ties the benefit to work.

“If pulling families out of poverty were as simple as handing moms and dads a check, we would have solved poverty a long time ago,” Rubio wrote in an op-ed in the National Review.

Asked for her thoughts on the expanded child tax credit, New Mexico’s lone Republican member of Congress, Rep. Yvette Herrell, wasn’t dismissive of it, even though she voted against the stimulus package that contained the expansion.

“Allowing families to keep more of what they earn is a good thing,” Herrell said in a statement to the Journal, adding that former President Donald Trump’s tax cuts returned money to many families. “My opposition to the Democrats’ stimulus bill was the permanent policy changes and unnecessary spending the $1.9 trillion bill included. That unprecedented level of spending is gravely concerning – especially the hundreds of millions in earmarks.”

The 2021 child tax credit sets up a path for the money to flow directly into a mother’s or father’s bank account periodically throughout the year, essentially creating an income floor that no child will live under. The money will go to families even if the parents don’t report any income, which is a change from existing tax credits that top out at $2,000 per child per year.

Emma Mehrabi, director of poverty policy for the Children’s Defense Fund, said the money from the expanded benefit could start flowing into parents’ bank accounts as early as July. The money will technically be considered an advance on their 2021 tax refunds, and the stimulus bill tasks the government with creating an online portal by this summer so families can enter information about their children and income and start receiving their payments.

But the expansion is more than just additional assistance to families, said James Jimenez, executive director of New Mexico Voices for Children. He said the expansion also marks a change in how to think about government assistance. It’s different from traditional forms of social programs, he said, like food stamps or housing assistance, because it lets families decide how best to use the money.

“One of the nice things about doing something like the child tax credit is the notion that families know best on how to support their needs,” he said. “When you use a tax credit model, it puts the money and the decision power back in the hands of the families.”

In New Mexico and across the country, the expansion will have a massive footprint. About 95% of children in the state, or 454,000 kids, will have money directed their way because of the tax credit expansion, according to the Center on Budget and Poverty Priorities.

By some estimates, the monthly payments will lift about half the children who currently live below the federal poverty above it.

The federal poverty level for 2021 is $26,500 for a family of four; New Mexico is one of the poorest states in the nation, with 18.2% of its population living in poverty. The Center on Budget and Poverty Priorities estimates that the direct payments will lift 32,000 New Mexico children above the poverty level by the tax credit expansion. About 39,000 children in the state who live in deep poverty will be lifted closer to the poverty level.

“To the families in poverty, it is significant. To the families who are working poor or just above poverty, it is significant,” said James Gannon, the CEO of Catholic Charities of Central New Mexico. “This will address poverty and serious poverty in the United States.”

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