Two weeks ago, President Biden signed the American Rescue Plan into law. Like the previous two pandemic relief bills, the legislation sends aid to most Americans through direct payments, this time up to $1,400 per adult.
But a separate part of the law may be more significant: the expanded Child Tax Credit (CTC). Not only will it deliver more benefits, but the program will deliver those quite differently. The CTC used to offer a once-a-year tax credit for families that made enough to file taxes — which left out 27 million children living in households with incomes too low to file. The expanded program will send monthly checks of $300 per child to households ranging from those with no income to those bringing in $150,000 a year. As a result, 93 percent of American children are living in families that will receive these monthly checks, until this expansion expires after one year.
This expansion departs sharply from the way the American welfare state has worked in recent history. Instead of delivering benefits hidden in the tax code to wealthier Americans, the new CTC shifts toward a more universal safety net clearly sent by the government.
My research suggests that this shift may help create a more trusting, well-informed, engaged and equal citizenry.
How Americans see government’s role in their lives
In 2016, I conducted 58 interviews in an Upper Midwest state to investigate how people feel the government affects their daily lives. Questions included asking interviewees if they had ever benefited from government policies and inquiries about people’s contact with government over the previous year.
White people held a common misperception about how the U.S. government distributes assistance. In particular, many believed that government uses its force to take tax dollars to fund poverty policies like welfare, which scholars find is widely misperceived as primarily benefiting Black Americans and doing little for White Americans.
Building on these interview findings, I analyzed answers to a few key questions in the nationally representative 2016 American National Election Study. When asked if they “trusted government to do the right thing,” White respondents’ answers were related to their attitudes about welfare. Those who trusted the government the least also held the most negative views of welfare. In other words, the belief that the federal government’s primary task is to channel tax dollars to poor Black Americans is linked to Whites Americans’ historically low levels of trust in government.
Biden’s Democrats want to roll back the Reagan era. Are the party and the country ready?
Federal government benefits have been hidden from public view
Where do White Americans get this idea? From the way the U.S. federal government has shifted its effort to shore up Americans’ economic security — creating a social safety net that benefits the middle class and wealthy while being invisible to the average citizen.
Today, the U.S. government delivers many of its programs through tax breaks. These include the tax break employers receive to offset the expense of providing employee health insurance, a policy that costs the federal government $300 billion annually. From 1981 to 2010, the cost of such tax breaks grew by 130 percent, so that the federal government lost $1.1 trillion dollars to 151 different tax breaks in 2010. Put differently, the government invested $1.1 trillion in Americans’ economic security by forgoing these taxes. But because this assistance is hidden in the tax code, few Americans realize their benefits are underwritten by the federal government.
These tax breaks are unevenly distributed
Not all Americans receive this inconspicuous assistance equally. Much of it goes to those with full-time jobs or those who own homes. In 2019, almost 60 percent of the aid from tax breaks went to individuals with incomes in the top fifth — and just four percent went to those in the bottom fifth. Nearly a quarter of these funds went to the top 1 percent alone. Moreover, the United States’ history of discriminatory housing and labor market policies means that this assistance goes disproportionately to White people.
The irony is thick. Over the last 50 years, tax breaks for the White and wealthy have skyrocketed but stayed hidden. Meanwhile, public resentment about welfare has grown even as its funding declined. This helps explain why White interviewees did not trust the government, believing that it shelled out for poor Black people and gave nothing back to them. This misperception divides different demographic groups that might otherwise work together to advocate for policies that would benefit all. The result is a less informed, less engaged and less trusting electorate.
The expanded Child Tax Credit could alter this
The CTC expansion disrupts this history. Unlike many current poverty policies, it does not give states the authority to change the policy. That will lessen discrimination against Black Americans, as states with larger Black populations will be unable to reduce benefit levels.
It also creates a more universal benefit across incomes. In the former CTC, a family with no income and two children received zero benefits — while a household with one child making $150,000 received the full benefit of $2,000. In total, 75 percent of all White children were eligible for this full benefit, while just half of all Black children were. By contrast, the zero-income family in that example will now receive $7,200, and the latter $3,600. That’s why the expanded program is expected to cut child poverty by 45 percent, and by 52 percent among Black children.
And since these CTC benefits will be delivered in monthly checks from the Treasury Department instead of through an annual tax break, beneficiaries will more easily perceive the government as working for them, instead of crediting H&R Block for a nice year-end return.
Social Security for children
Rep. Rosa L. DeLauro (D-Conn.) recently referred to the CTC expansion as the “children’s version of Social Security.” The similarities may affect U.S. democracy.
When President Franklin D. Roosevelt and congressional Democrats created Social Security during the Great Depression, the program politically mobilized seniors by giving them a new collective self-interest in government policy. As a result, senior citizens are among the most powerful U.S. voting blocs today. As Biden and the Democrats consider future policies, they may wish to consider the democratic engagement that can come from delivering more universal and visible assistance.
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Aaron Rosenthal (@AjR_StP) is an assistant professor of political science at Simmons University. His current book project, “The State You See: How Government Visibility Creates Political Distrust and Racial Inequality,” explores how social welfare and criminal justice policy changes have shaped American democracy.