Priceless Joys, Pricey Realities: Tax Credits and Purposeful Parenting
Michael Chan-Lok
Purposeful Parenting Month promotes intentional and proactive parenting strategies that positively impact child development. This period encourages reflection and aspiration, offering families a framework for improvement. However, it also highlights resource and opportunity disparities faced by many low- to moderate-income families.
To help create equitable outcomes and provide necessary resources for these families, policymakers should expand access to and broaden awareness of programs supporting households with children, like the Child Tax Credit (CTC) and Child and Dependent Care Tax Credit (CDCTC). These programs can play a crucial role in alleviating financial burdens for families, allowing parents to invest more in their children’s development and well-being.
Poverty’s Impact on Child Development and Into Adulthood
Purposeful Parenting Month emphasizes the importance of guiding children to reach their full potential through active, engaged parenting. However, even the best parenting skills can struggle to overcome poverty’s detrimental impact on youth development. While intentional parenting is crucial, the harsh realities of poverty, limited access to resources, and the stress of financial instability can significantly hinder a child’s growth and potential.
Children who experience poverty lack adequate access to essential resources like food security, healthcare, and stable housing. These challenges are linked to worse physical and mental health outcomes; impaired social, emotional, behavioral, and cognitive development; and reduced educational attainment. According to the Children’s Defense Fund’s 2023 State of America’s Children Report, 1 in 6 children under five-years-old (or about 3 million children) are classified as poor—the highest rate of any age group. This is particularly alarming as a child’s first five years are critical for development. The brain develops faster in this window than at any other time in our lives, with 90% of brain development occurring by age 5.
Moreover, childhood poverty often has long-lasting effects, increasing the likelihood of remaining in poverty as an adult. Children who spent eight to 14 years in poverty were five times as likely to experience poverty at age 35 compared to children who spent fewer than seven years in poverty. This in turn creates an ongoing cycle of generational financial hardship that is further exacerbated by rising costs of living and economic instability.
Recognizing this cycle is crucial, as it underscores the urgent need for targeted interventions like the Child Tax Credit (CTC). The CTC has already demonstrated its power to lift children out of poverty, making it an indispensable tool in breaking this cycle. By providing immediate financial relief and a genuine pathway to stability, the CTC offers hope for future generations to escape the grip of persistent poverty.
When the American Rescue Plan expanded the CTC in 2021, over 2 million people were lifted out of poverty, reducing the poverty rate from 9.7% in 2020 to 5.2% in 2021. However, when the expansion expired and lawmakers failed to renew the policy, poverty levels nationwide more than doubled from 5.2% in 2021 to 12.4% in 2022 – significantly above pre-pandemic levels and spotlighting the direct results of policy choices.
Parenthood is Priceless, But Pricy
At the heart of parenting is the drive to provide a nurturing and supportive environment. However, the rising costs of raising a child can overshadow the exciting moments of watching children grow and thrive. A recent Brookings Institution study shows that the average middle-income family with two children will spend $310,605 to raise a child born in 2015 up to through the age of 17 in 2032. These expenses include housing, food, childcare, education, transportation, healthcare, and other essential living and lifestyle costs.
Childcare in particular is one of the biggest expenses, costing parents a national average of $11,582 annually per child, according to the First Five Years Fund, which can be a significant portion of yearly earnings for families who live below the poverty threshold. The CDCTC is a useful resource to help families offset the costs of childcare or dependent care expenses and is one of a few tax provisions that is proven to effectively address the cost of and accessibility to childcare. In combination with the CTC, this financial assistance – when at its expanded rate – has proven to help lift families out of poverty by covering essential expenses and ultimately propels them toward greater economic stability and opportunity.
What All of This Means
Parenting is one of the toughest yet most rewarding jobs out there. The role comes with moments of happiness and love paired with times of pressure and stress. Resources like tax credits help mitigate some of the costs of raising children for low- and middle-income households, enabling parents to provide the goods and care necessary to support healthy development.
Policymakers could better provide parents support through improved legislation, such as enacting an expanded and fully refundable CDCTC that offsets some childcare costs and affords parents the chance to create a nurturing environment where their children can thrive. As it stands, the federal CDCTC is nonrefundable, lacks inflation adjustment to meet the rising costs associated with childcare, and does not reach or support all low-income families who can benefit from claiming it.
By addressing barriers to economic upward mobility and advancing bills that adjust effective anti-poverty programs for inflation, families can spend more time being present with their children and putting their attention and energy into their role as parents.