For six months, additional cash flowed to Americans through the expanded Child Tax Credit program.
The monthly checks have helped Michigan families fill budget gaps, with most using the few hundred dollars to buy basic necessities.
More than 3 in 4 Michigan families used the child tax credit last year to buy food, according to a US Census Bureau survey. About 41% of parents said they used the tax credit to buy clothes, 29% used it for housing and 45% used it for utilities.
“It was money people were spending on basic necessities,” said Nick VinZant, who analyzed the data for QuoteWizard.
The survey also showed that 27% of Michigan families used the money to pay off debts.
Related: Child Tax Credit payments are coming this week, but will they become permanent?
The $1.9 trillion US bailout increased the tax credit from $2,000 to $3,600 per child, providing families with much-needed financial support during the pandemic. Monthly checks started going out in July 2021 and the other half could be claimed when families file their taxes this year.
Research from the Center for the Study of Social Policy shows that the top uses of the Child Tax Credit in Michigan were for groceries, rent or mortgage, child care, utilities including bills Internet and clothes. This survey also found that black and Hispanic families in Michigan were more likely than white families to spend money on housing or food.
“Families often took advantage of the flexibility of the CTC as an unconditional cash payment to use it to meet several basic needs at once,” researchers from the nonprofit policy organization wrote.
More than one million child tax credit payments have been sent to Michigan, averaging $455 per family.
Related: US inflation jumps 8.5% in one year as gasoline prices soar
These checks came as prices began to rise.
Inflation, now at 8.5%, has driven up the cost of groceries, rent and gas during the COVID-19 pandemic.
“The child tax credit started kicking in and impacting people’s lives as inflation did the same thing,” VinZant said. “People spent that extra money on basic needs: food, clothing and housing, because those three areas are much more expensive.”
Monthly checks ended in December, dealing a heavy blow to families as inflation soared.
“While the Child Tax Credit ended up being a huge boon to people, it ended up being a bit of a washout because it was canceled out by inflation,” VinZant said.
Some are pushing for the expanded child tax credit to be permanent, with research showing it would cut child poverty in half, as children of color see the biggest gains. In Michigan, this would reduce child poverty overall by 44%, CSSP researchers estimate, 52% for Latino children and 43% for black children.
A study published in the National Bureau of Economic Research also found that the benefits of an expanded child tax credit far outweigh the estimated cost. Legislation to expand the tax credit, however, has stalled as federal lawmakers tussle over the Build Back Better spending bill.
“It’s something that definitely needs to be revisited,” VinZant said. “It’s not money that people were saving or setting aside for a rainy day or spending on frivolous things.”
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