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Why single parents are getting less from the child tax credit than married couples

Some single parents will get a smaller child tax credit than a married couple with a comparable salary. Democrats have introduced legislation to address the discrepancy. FILE - In this April 25, 2021 photo, Nani, 10, helps her baby cousin Santiago, (nine months) learn to walk after moving in with her extended family in Sellersburg, Indiana. (Photo by John Moore/Getty Images)
Some single parents will get a smaller child tax credit than a married couple with a comparable salary. Democrats have introduced legislation to address the discrepancy. FILE - In this April 25, 2021 photo, Nani, 10, helps her baby cousin Santiago, (nine months) learn to walk after moving in with her extended family in Sellersburg, Indiana. (Photo by John Moore/Getty Images)
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Most parents can expect to see monthly child tax credit payments beginning July 15, but for single parents, an overlooked provision of the American Rescue Plan will leave them with fewer benefits than married households with a comparable income.

As part of the $1.9 trillion COVID-19 relief plan, Congress expanded the child tax credit so parents can receive up to $3,600 for every child under 6 years old and $3,000 for every child between 6 and 17. From July through January, the Treasury will send families an advance payment of $300 for every child under 6, including babies born in 2021, and $250 for older children. The remainder of the tax credit will be applied to 2021 tax returns.

Because of the way the tax credit was structured, single parents filing as heads of their household stop receiving the full benefit when their gross adjusted income exceeds $120,500 per year. The benefits start phasing out for two-parent households earning $150,000. Single filers claiming children only qualify for the full benefit if they earn less than $75,000 per year.

The discrepancy means that a single parent of three young children making $130,000 per year would get less from the child tax credit than a two-parent household with the same number of children earning $150,000.

A group of House Democrats led by Rep. Katie Porter of California, a single mother of three, argued the design was fundamentally unfair to single parents and they introduced legislation earlier this month to equalize the income cap for single and two-parent households at $150,000.

"There's an assumption built into this that single parents simply don't have the same level of expenses in raising a child as married couples and it's the opposite," Rep. Porter told MSNBC last week. "Trust me, there is no discount for single parents. I've been looking."

The White House has said 39 million families will benefit from the expanded tax credit in the American Rescue Plan. According to the Urban Institute, up to 92% of all U.S. families are expected to receive some benefit, with only the very highest-income people disqualified.

Under the current tax law passed in 2017, higher-income earners still qualify for a $2,000-per-child tax credit, which starts to phase out for single adults earning $200,000 and married couples earning $400,000. The Biden administration's child tax credit tops off that benefit at up to $3,600 per child for lower-income families.

That means a single mother earning $135,000 with three children under 6 years old would get approximately $4,825 in child tax credits. That is 10% less than a two-parent household earning $150,000 and qualifying for the full benefit.

Single-parent households have been on the rise for decades in the United States and nearly one-quarter of American children under 18 live with one parent and no other adults but tax laws have remained the same in treating single and married filers differently.

Advocates have noted that because the tax benefit is for the child, it should be applied equally across the board to all children, regardless of their parent's marital status or tax situation.

"I think it's really a matter of basic fairness," said Shawn Fremstad, a senior policy fellow at the Center for Economic and Policy Research. "If you're a single parent having the same household income as a married couple, and you've got the same number of kids— because we’re talking about a child benefit, it should be the same child benefit."

Supporters of the bill argue that single working parents face greater financial burdens than married couples, particularly when it comes to child care. They also tend to have greater income instability than two-parent households.

Regardless of marital status, raising a child in the United States is expensive. According to Department of Agriculture projections, the average family will spend nearly $13,000 per year to raise a child or $233,000 from birth to age 17—not including the cost of college. Some have linked those high costs to the record low U.S. birth rate, which dropped 4% in 2020.

The pandemic further exacerbated the cost of raising a family, including food and housing price inflation. Nationwide, families with young children saw the price of child care facilities spike 41% on average, with many parents putting close to 20% of their income toward child care.

So far, only Republican Sen. Mitt Romney of Utah has proposed a universal child tax allowance that would apply to every child in a household regardless of the parent's marital status. The Romney proposal would expand eligibility and payments to families while eliminating other low-income tax credits like the Temporary Assistance for Needy Families and Earned Income Tax Credit.

Outside of Romney, there is opposition building within the Republican Party and among conservatives, who have historically been more sensitive to marriage penalties than single-parent tax penalties.

The different treatment of single and married parents has been a part of the child tax credit since it was created in 1997. In part, the design was meant to ensure a median-income married couple would not face a higher tax burden for filing jointly. In effect, it raised the tax burden on single-parent families with an equal number of children

"Lawmakers are always balancing those two issues," said Elaine Maag, a principal research associate at the Urban Institute. She anticipated that if Democrats move to restructure the child tax credit in a way that creates the opportunity for more marriage penalties, "then there will be more pushback from Republicans."

The fight to raise the income cap for single parents is happening at the same time President Joe Biden has called to extend the child tax credit through 2025 and potentially make it permanent. Democratic co-sponsors of the House legislation said that timing makes the reform even more important.

"Given that we are already looking at making this change to sustain the drastic reduction of child poverty in America for years to come, it makes sense for Congress to also consider ways to improve the credit as we work to make it permanent," Rep. Don Beyer, D-Va., told Sinclair Broadcast Group.

Republicans have weighed in with counter-proposals to making the pandemic child tax credit permanent. This week, Sen. Josh Hawley of Missouri proposed a plan to provide a $6,000 child tax credit to single working parents and $12,000 for married couples with children under 13, calling it "pro-family and pro-work."

In a 2020 report titled "The Demise of the Happy Two-Parent Home," Senate Republicans proposed financial incentives to use an expanded child tax credit to encourage "family stability" and two-parent households. "By reducing the cost of single parenthood, more generous safety net programs may incentivize it," the report claimed.

W. Bradford Wilcox, director of the National Marriage Project at the University of Virginia, argued that the Democrats' proposal to raise the income cap for single parents would end up penalizing married couples. "I do not support this proposal because, in practice, it will end up being one more federal policy that makes marriage a bad financial deal for far too many families," he said.

Researchers have expressed doubts about whether tax penalties or incentives motivate family behavior. Maag noted the family tax issues are complex. "It's never been clear they were a real driver of behavior but it's certainly an argument that gets made a lot."

The added cost of raising the income cap for single parents is also unlikely to make a significant impact on the budget. The current child tax credit is projected to cost $110 billion over the next two years or $1.2 trillion over the next ten years, according to the Committee for a Responsible Budget.

Fremstad estimated several hundred thousand single parents would likely see increased payout if both single parents and couples making up to $150,000 annually qualified for the full tax credit.

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"There are just not a lot of single parents in the income range of $115,000 to $150,000," Fremstad said. "So, it seems kind of commonsense to me and certainly not radical reform of the tax code."

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