Save the Child Tax Credit from Administrative Burdens
It can reduce child poverty by 40%, but not if Joe Manchin adds work requirements
Welcome to Can We Still Govern?
For the first newsletter, I wanted to write about politics (which lots of people do) and how it connects to policy (fewer do this) and administration (which almost no-one writes about). This reflects my expertise, general approach to thinking about the world, and what you can expect to find on here.
So: I am sharing an op-ed co-written by Pam Herd (@pamela_herd) where we talk about Joe Manchin, the Child Tax Credit (CTC), and its implementation. The CTC, or at least its recent and temporarily expanded version, is the single most effective policy tool on the table to help kids avoid poverty.
Depending on the estimates you look at, it can reduce child poverty by 40-50%.
That’s huge!
But the big danger is that a fairly innocuous sounding change that Joe Manchin wants – work and educational requirements – would dramatically blunt our most effective means of reducing child poverty in America.
The CTC is designed to address a traditional problem with US politics: redistributive programs have limited political support. In particular, they are vulnerable to be framed as rewarding the “undeserving” – think Reagan’s welfare queen.
(Brief nerdy research aside: The whole topic of deservingness is an incredibly useful concept from political science - big hat tip to scholars Anne Schneider and Helen Ingram. Policymakers are simply less likely to provide generous government support to those seen as undeserving. In my own research (with Martin Baekgaard and Mette Kjærgaard Thomsen), we ran an experiment with actual policymakers that finds that they are more willing to support work requirements in a welfare program if presented with a vignette that presents even a single program client as undeserving).
Beliefs that the poor are undeserving lead to less generous and more burdensome welfare programs, helping to explain why the poorest Americans are left behind. Hence the adage, “programs for the poor are poor programs.” Other big and successful redistributive programs like Social Security and the Earned Income Tax Credit avoid the deservingness trap because benefits are tied to work.
By contrast, the CTC benefit are tied to kids – who could be against helping kids?
No-one, right?
So, what do you do if you want to block the CTC expansion from becoming permanent? You could just still run the old play, and try to attach deservingness framings to the CTC by insisting it has to be tied to work, that the status of being a kid is not sufficiently deserving. In other words, we reserve our support for the kids of working parents. Of course, it’s rare that people explicitly put it in these terms. Some arguments instead echo 1990s welfare reform logic: welfare creates a culture of dependency and indolence that paternalistic welfare reforms can fix via incentives.
Work requirements poll well, though that support tends to erode as people personally experience work requirements or understand that they tend to be used to cut off benefits. Support for work requirements among policy wonks has been on the decline, as the evidence mounts they do little to increase labor force participation but do a lot to reduce access to benefits. The CTC originated with such wonks, most obviously via a National Academies of Science report on reducing child poverty.
Even some conservative politicians like Mitt Romney, who has argued for his own version of the CTC, view it as a pro-family subsidy: the “work” involved is raising the family, not labor market participation.
Pro-market conservatives can also take comfort in analyses that the CTC will actually encourage labor force participation by providing support for childcare, and will help to boost consumer spending.
Work requirements are a wrench in the effectiveness of the CTC. For the CTC to have its magical effect on reducing poverty, it needs to get to the poorest people. What we know is that as you start imposing requirements on benefits, you start to lose people, even people who would be eligible, because of the administrative burdens involved.
Let’s start with an extreme example: when Arkansas imposed work requirements on Medicaid, one study found that 95% of those who lost benefits were eligible, but simply could not get past the administrative burdens in documenting their status. The numbers would not be so bad for the CTC – about four in five eligible recipients get the EITC, which has a work requirement and like the CTC is managed by the IRS – but the poorest would be the most likely to lose out.
How big of an effect would work requirements have? One preliminary calculation by the Jain Family Institute suggests it would undermine the anti-poverty effects of CTC from 40% to 8%.
In my view, the best designed version of the CTC would start by asking how can we reduce burdens as much as possible. The answer is to make it a universal benefit, and then just tax higher income earners a little more. A universal design would reduce the frictions involved.
Unfortunately that model is not happening. But the current CTC does help a lot of people: it already makes about 9 in 10 families with kids eligible for benefits. The IRS has its hands full trying to reach all of them. A special challenge is enrolling CTC recipients in intense poverty, many of whom are not obliged to submit tax returns and so are harder for the IRS to find. But if they succeed, the CTC would represent a tangible example of a program that is directly helping a lot of people, with low administrative costs, and without the bureaucracy people normally associate with government. Those are a lot of real pluses reflecting a well-designed policy. The CTC is already popular: about 6 in 10 people support the program, and that number will only increase as people see the benefits of the monthly CTC payments.
The Manchin plan would move us in the opposite direction, making the program less universal and increasing the number of administrative burdens, adding more frictions that makes the program less efficient at its basic job of reducing child poverty. As we describe below, it would especially hurt residents in states like Manchin’s West Virginia.
Since I do research in this area, I’m a little obsessed with administrative burdens and where they come from. It’s rare to see them created in real time, when we have such clear evidence of the damage they would do. Anyone who cares about reducing the inequality we see in America today, and in giving kids a reasonable start in life should not just support the expanded Child Tax Credit, but oppose administrative burdens that will undermine its effectiveness.
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If you want to listen to a podcast about administrative burdens in social policy, here is a recent one we recorded with the Progressive Policy Institute.
And here is that op-ed from The Hill, which I’ve also pasted below:
To reduce poverty, stop burdening the poor: What Joe Manchin gets wrong about the child tax credit
A permanent expansion of the Child Tax Credit is the heart of President Biden’s plan to reduce poverty. The CTC’s temporary expansion has already drastically cut child poverty and food insecurity, but these gains are under threat. Sen. Joe Manchin (D-W.Va.) wants to add work and education requirements. Our research has shown that such requirements will neither promote work nor education, but instead become administrative burdens that block government benefits from reaching those who need them most.
How does the expanded CTC work? The American Rescue Plan made two major changes to this long-standing program. First, it made the value of the credit more generous. Second, it made it fully refundable, meaning that families with very low incomes can claim the full value of the credit.
Manchin has expressed concern about the new CTC: “Let’s make sure we’re getting it to the right people. There’s no work requirements whatsoever. There’s no education requirement. Don’t you think if you want to help the children, the people should make some effort?”
Manchin’s proposal exemplifies how policymakers routinely add administrative burdens to weed out the “undeserving.” But let’s be clear about who “the right people” are for the CTC: it is kids trapped in poverty through no fault of their own.
If we truly want to “help the children” we need only answer two simple questions. First, is the expanded CTC reducing poverty? Second, what will adding Manchin’s proposed requirements do to its effectiveness?
The answer to the first question is that the expanded CTC has been extraordinarily successful. The first round of new CTC payments was launched in July, and had an immediate effect. Child poverty declined from 15.8 percent to 11.9 percent. Child hunger also declined, with the share of families earning less than $50,000 who reported not having enough to eat dropping from 26% to 18.5%.
The long-run effects of the CTC will be transformational if recent changes are made permanent. An analysis by the Urban Institute finds that in a typical year, the expanded CTC would reduce child poverty by 40 percent. The effects would be even greater in Manchin’s West Virginia, where child poverty would be cut almost in half, from 13.8 percent to 7 percent. The CTC would also help to dramatically reduce the increased risk of poverty that Black and Latino kids face relative to their white peers.
The answer to the second question is also clear: adding requirements to the CTC means fewer children would be helped, and those in the most intense poverty would be most likely to lose out.
In our book, we document how administrative burdens reduce the reach of the safety net, limiting take-up of social programs. By contrast, the CTC has been a success: 94% of children in eligible families are receiving the benefit. Minimizing burdens has been the key to this success. Rather than asking families to complete new applications, they are automatically enrolled based on their tax data.
Policymakers should look for ways to reach the millions of children in eligible families not receiving the CTC, rather than adding requirements that will exclude millions more. Work requirements will hurt families in the most intense poverty, as well as creating confusion and new hassles. Complex demands, such as documenting educational participation, will further decrease take-up as families struggle to deal with unfamiliar paperwork.
Helping families to improve their lot in life through work or education are worthy goals. But attaching work or educational requirements to the CTC will have the opposite effect. Poor families already have strong incentives to work. The Treasury Department estimates that 97% of families receiving the CTC are working. Other important social programs already include work requirements, most notably the Earned Income Tax Credit.
We have clear and mounting evidence that work requirements don’t work: they do little to encourage labor force participation, but dramatically reduce take-up. By contrast, investments in kids do work: they provide a cushion that allows single mothers to get child care, increasing labor participation, and in the long run result in the kind of educational outcomes and social mobility than Manchin says he wants.
The United States is at a crossroads when it comes to our safety net. It’s not just about generosity, it’s also about access; will help be bound in red tape or will it actually be accessible? Adding work requirements to the CTC may sound reasonable in the abstract, but in reality it represents a political choice to leave millions of children mired in poverty.
Pamela Herd (@pamela_herd) and Donald P. Moynihan (@donmoyn) are professors at the McCourt School of Public Policy at Georgetown University and the authors of “Administrative Burden: Policymaking by Other Means.”