Less is More, But Not for Everyone
July 12, 2023Print
By Michael Chan-Lok
We live in a world full of clutter. Owning unnecessary material possessions and living in excess; being glued to the Internet and disassociating from a present state; or simply navigating the chaos of daily living are just some of the ways life becomes overwhelming. In the spirit of National Simplicity Day, which is recognized every July, in order to prioritize and attain simplicity, it’s important for us to take stock of our collective basic needs, determining how best we can help the most vulnerable among us meet them.
While some Americans are seduced by excess spending, others are bogged down by the financial stressors that come with trying to meet their basic needs. Despite inflation cooling down for the last 12 months and reaching its lowest rate since March 2021, essentials, such as groceries, are 5.8% higher than they were a year ago. According to a survey by Nerdwallet, about 74% of Americans maintain a monthly budget and despite financial tracking efforts, 84% have found themselves exceeding that budget. Of that 84%, nearly half use a credit card to make purchases once they surpass their limits.
Financial worries aren’t an isolated issue by any means; a June 2023 survey released by Capital One noted that 73% of Americans rank finances as their number one cause of stress. But, as a society, we are largely unaware of how many families face economic hardship. Data from the U.S. Census Bureau noted that about 50 million Americans (or roughly 15% of the population) had household incomes below 125% of the poverty threshold in 2022. That 50 million includes approximately 15.2 million (or about one in five) children. In addition, the Black community (26%) and Hispanic community (23%) are more than twice as likely to have low incomes compared to non-Hispanic Whites (11%) and Asian Americans (11%).
Federal programs such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) can help families move toward meaningful economic security and thrive in the long run. For the 2022 tax year, filers who are eligible for the federal EITC can receive between $560 with no qualifying children, and up to $6,935 with three or more qualifying children. Those who qualify for the federal CTC can receive up to $2,000 per qualifying child, with up to $1,500 of the credit being potentially refundable. Furthermore, 31 states, the District of Columbia, and Puerto Rico provide additional assistance by offering a state EITC that typically mirrors the federal EITC criteria, and 12 states offer some form of a CTC.
When the American Rescue Plan Act (ARPA) temporarily expanded the CTC, studies documented the positive impact of the credit on reducing poverty and food insufficiency. Concluded findings from the Consumer Expenditure Interview Survey (EI), overseen by the U.S. Bureau of Labor Statistics, found families who received the credit used this financial boost to improve the well-being of both their children and the entire household. On average for every $100, families spent $75, mainly to cover basic needs such as food ($28), housing ($31), and child-related goods and services ($15). By December 2021, about 91% of low-income families used their benefits on these basic needs, reaching over 61 million children, cutting child poverty by roughly 30%, and slashing food insufficiency by over a quarter (26%).
Anti-poverty efforts such as the EITC and CTC not only help families and individuals meet their basic needs, but they can also alleviate issues around mental health for low-income families. Data from the Centers for Disease Control and Prevention (CDC) shows that, compared to adults in higher-income households, those living below the federal poverty level experience mental distress 70% more often.
Given the varied spending habits of Americans and the growing encouragement to spend more to reinvigorate the economy, illuminating credits and benefits can help us cut through the noise, and make it easier for people to meet their most basic needs. By cultivating knowledge and awareness of tax credits like the EITC and CTC, it becomes easier to ensure that each person near, at, or below the poverty level has the opportunity and ability to meet their evolving needs with ease. Ultimately, simplicity isn’t a privilege. It’s a necessity.