Vice President Kamala Harris recently unveiled an economic plan for her presidential campaign, with a central focus on transforming the Child Tax Credit (CTC) into a child allowance.
Unintended Consequences of the Child Allowance
While the proposal aims to increase financial support for families with children, critics argue that it could inadvertently discourage parental employment and harm the long-term prospects of children. These potential negative outcomes, coupled with the substantial cost of the plan, should prompt voters to scrutinize the policy.
The current CTC provides up to $2,000 per child, but it is only available to parents with a tax liability or earnings. Harris’s proposal seeks to increase this credit significantly—up to $6,000 for newborns, $3,600 for children aged 1 to 5, and $3,000 for children aged 6 to 17. Moreover, the plan would remove the work requirement, allowing families with no tax liability or earnings to receive the full amount.
A Step Backward for Welfare Reform
Delinking the CTC from work represents a significant departure from the progress made in welfare reform during the 1990s. The shift towards a work-rewarding safety net was instrumental in encouraging single parents, particularly mothers, to enter the workforce. This change brought more resources into households, reduced child poverty, and improved long-term outcomes for children. Harris’s proposal, however, risks undoing these gains by essentially reintroducing unconditional cash welfare.
Under the proposed child allowance, a non-working single parent with two children could receive between $6,000 and $9,600, in addition to the $9,000 they already receive in food stamps. This would provide guaranteed assistance of $15,000 to $19,000 annually, not tied to any employment requirement. In many states, this amount exceeds the inflation-adjusted value of food stamps and cash welfare combined that a similar family would have received in 1996, before welfare reform.
Long-Term Risks for Children and Economic Costs
The most concerning aspect of Harris’ plan is the potential reduction in the incentive to work. By offering substantial financial support regardless of employment status, the proposal could lead over a million parents, particularly single parents, to exit the workforce. The 2021 CTC expansion, which closely resembles Harris’ proposal, showed similar effects in studies, predicting significant employment losses.
The impact on children is also a critical issue. While increased financial resources might reduce child poverty in the short term, the long-term effects could be detrimental. Employment exit could deprive children of both financial and non-financial benefits associated with having working parents. Research indicates that work-rewarding tax credits have led to academic improvements and long-term gains in employment, earnings, and self-sufficiency for children. In contrast, the evidence supporting the positive long-term effects of unconditional government aid is weaker.
Finally, the cost of the Harris plan is staggering. The Committee for a Responsible Federal Budget estimates that the proposal would cost over a trillion dollars in the next decade. With the federal debt already at $35 trillion, this additional spending could impose a significant burden on future taxpayers, including the very children the plan aims to help.
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