Family Finances

For Children, Better Data Equals Better Policy

July 27, 2021  • Justin King & Financial Security Program

Starting earlier this month, parents across the country began receiving a monthly cash infusion of up to $250 or $300 per child. The Child Tax Credit (CTC) has been expanded by Congress under the Biden administration’s COVID-19 stimulus programs to reach more parents and make payments monthly instead of annually—a big help given the volatile incomes of US workers.

The monthly direct deposit or mailed check will be a huge leap forward in supporting America’s children. The National Academies estimate that the revised credit can cut the child poverty rate nearly in half, lifting 4 million children out of poverty. Moreover, relatively few families in America have a steady cash flow that leaves them with enough at the end of every month to put away for a rainy day—a pillar of financial security. Nearly half of the US workforce earns wages that cannot cover a family’s basic needs—the CTC looks like a policy that can help all families succeed.

Critically, the program’s 2021 updates can also now reach the lowest income families, which the prior version omitted because they earned too little to qualify. For example, prior to this expansion, the program missed 70 percent of children of single mothers. Now, a single mother with one toddler who earns $10,000 a year as a home health aide would receive a child tax credit of $3,600, up from the $1,125 she received under the original program. An additional $2,400 each year can open up tremendous opportunities that would otherwise be out of reach. It can allow parents to save for a mortgage or pay down college debt more quickly or put more away for retirement. (These once excluded families are now covered by the policy, but now must file taxes or provide other essential information to the IRS to receive CTC payments. For more information on helping connect people to the CTC, visit GetCTC.org or TaxTimeHub.org.)   

The expanded CTC is currently being distributed monthly for the remainder of 2021. President Biden and congressional Democrats have clearly said they want to extend the program and keep the payments to families in place for coming years, but the program’s fate will be determined by Congress in the coming months. 

Fortunately for policymakers working on a tight timeline, new sources of rapid response data can deliver evidence that they can use to evaluate, extend, or improve the program later this year. Even better, this data comes directly from people impacted by the CTC, creating the opportunity for policymakers to respond directly to the real problems and successes of the people they’re trying to serve. All they need to do is listen to learn about the real-world impact of the expanded CTC.

FinTech and Civic Tech Innovators are helping families become financially secure

Digital tools can revolutionize how we get services to more families more efficiently. They also provide a rare opportunity to hear from the people who use the services. For policymakers, the granular data from these digital tools offers a deep dive into their constituents’ needs and successes, increasing the likelihood that policy will be responsive and effective.  

Organizations like Code for America, SaverLife, Alluma, Propel, and others are using tech for social good—and demonstrating how using person-centered approaches can ensure a policy meets people’s immediate financial needs. During the pandemic, Code for America helped millions of low-income school children get needed lunch money when the free and reduced-price lunch program closed down with the schools. They quickly created digital tools for the public to access and the government to manage the school lunch program. Alluma uses tech to help benefits administrators and others streamline their sign-up and recertification processes so more eligible people can get the support they need. Propel helps SNAP beneficiaries more easily check their balance using an app instead of an arduous phone tree. SaverLife is helping low-income families build a savings habit and, during the pandemic, they partnered with Neighborhood Trust Financial Partners to provide emergency grants of $500 or $1,000 to almost 5,000 families.

How to Leverage Consumer Insights for the Child Tax Credit

Many of these Civic Tech and FinTech groups conduct fast surveys and quick data analysis to continually improve their products. The results can also help policymakers tweak and improve the Child Tax Credit and other benefits. SaverLife, for example, recently found that 78 percent of its users who didn’t file taxes last year hadn’t heard “a lot” about the expanded Child Tax Credit. Those who did not file taxes will need to use a different portal on the IRS website to file, which could lead to confusion or under-enrollment.

Propel, which serves one in four SNAP recipients, also found broad awareness of the Child Tax Credit—90 percent of their SNAP recipients knew of the program—but only about half thought they’d actually get the money beginning in July. Worryingly, only about one-fourth were confident they knew how much they should receive. SaverLife users were also confused about eligibility. Surveys and data analysis can provide important information about how parents are choosing to use their CTC funds, and how the payments are impacting household financial security.

These and other insights are critical for policymakers working to ensure that public benefits like the CTC are doing what they intended. By providing rapid insights sourced directly from people receiving the CTC, tech-forward, people-centered organizations can help policymakers define the best path forward. 

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