By / Aug 13

Today, parents of America’s 60 million children will begin receiving a second payment as part of the enhanced federal Child Tax Credit. The checks normally arrive on the 15th of each month, but the IRS is sending the money earlier because August 15 falls on a Sunday this year. As individuals begin receiving these payments, Christians may wonder what the program entails and what it means for families who receive the credit.

According to a new Household Pulse Survey (HPS) produced by the Census Bureau, the tax credits resulted in a reduction in the number of households with children that reported food insufficiency and trouble paying household expenses. Even though adults in households with children are more likely to experience food insufficiency, says the Census Bureau, those households saw a 3 percentage point decline between the surveys conducted before and after the Child Tax Credit payments.

Here’s what you should know about this benefit for families. 

What is the Child Tax Credit?

The Child Tax Credit is a provision that was included in the American Rescue Plan Act of 2021, legislation that provided economic relief because of the pandemic. 

The American Rescue Plan increased the Child Tax Credit from $2,000 per child to $3,000 per child for children over the age of 6 and from $2,000 to $3,600 for children under the age of 6. It also expands the ages of eligible children, which was previously capped at age 16.

The credit is being issued in the form of a monthly payment of up to $300 per child. The first payment began in July. The IRS sends the payments by direct deposit to the bank account they have on file. (​​Deposits for the Child Tax Credit are labeled as CHILDCTC in a family’s bank account.) If they don’t have bank account information for a family, a check will be mailed to them.

Who is eligible for the tax credit?

Nearly all families with children qualify for the credit, though some income limitations apply. The child tax credit begins to phase out for heads of household making more than $112,500 annually or couples earning more than $150,000 a year. (This calculator will estimate the amount you’ll receive.)

What about families who didn’t earn enough to receive the credit?

Parents and caregivers that didn’t earn enough income to be required to file taxes in 2020 or 2019 can still get benefits. To benefit low-income families, the credit has been made tax refundable, which means that families that do not have an income will also receive the money. 

Previously, low-income families did not get the same amount or any of the Child Tax Credit. Under the American Rescue Plan, all families in need will get the full amount.

Will low-income families that receive the Child Tax Credit still be eligible for other government benefits, such as SNAP, TANF, or WIC?

Yes, since the Child Tax Credit payments are not considered income, it does not change the amount of federal benefits received by a family. Such federal benefits include unemployment insurance, Medicaid, SNAP, SSI, SSDI, TANF, WIC, Section 8, or Public Housing.

What do families need to do to receive the money?

For families that filed taxes this year (i.e., filed a tax return for 2020), filed last year (i.e., filed a tax return for 2019), or that signed up for Economic Impact Payments ( “stimulus checks”) using the IRS’s Non-Filer tool last year, the monthly payment will be automatically sent to them by the IRS.

Families who do not meet the above criteria can still sign up at the Child Tax Credit for Non-Filers website.

Will the credit be given next year?

The American Rescue Plan authorized the Child Tax Credit only for 2021. However, President Biden has proposed in his American Families Plan to extend the credit through 2025 and make it permanently fully refundable.

How to help Christians think about this

Christians may disagree about the concept of direct payments from the government. Still, it should be noted that the goal is to decrease child poverty. As the study above notes, the payments did have some bearing on the number of households with children reporting as food insufficient or having trouble paying for their daily needs. This fact points to the way that economic concerns, especially in light of the pandemic and the many who lost jobs or were furloughed, continue to linger for individuals. 

Also, as we recently highlighted, the fact that over 70% of those seeking abortions do so for economic reasons, including a fear that they will be unable to support an additional child, addressing abortion through poverty measures is one way to advance the pro-life agenda of caring for the most vulnerable, both inside and outside the womb. 

As such, pro-life Christians should give careful consideration to the efforts of government officials to address such a pressing concern in the lives of children, though we may sometimes disagree about particular approaches or policies. Just as the tax code — not often a place where Christians think of advancing pro-life policy — confers benefits to marriage because of the recognition of its societal good, the aim of these payments to alleviate child poverty is one way to recognize children as a social good. Even if we would prefer another method or our political preference advocates a different way, a society that begins to have a greater appreciation for children and advances the protection of the vulnerable is clearly something pro-life Christians should appreciate. 

By / Mar 17

Two recent congressional programs—one proposed and one already passed—may have a significant effect on poverty in the United States.

The recent $1.9 trillion pandemic relief bill, called the American Rescue Plan, includes a number of benefits that will affect low-income individuals and families. Although this relief only makes changes for 2021, it could be extended or used as a model for other poverty-reducing programs in the future.

Another program proposed in February by Sen. Mitt Romney, called the Family Security Act, would also give monthly cash payments to parents and reform federal aid for low-income Americans that would lead to reductions in poverty.

Here is what you should know about these efforts.

What is the poverty reducing feature of the American Rescue Plan?

A primary feature of the relief bill is direct payments to taxpayers of $1,400, or $2,800 for a married couple filing their taxes jointly, plus $1,400 per dependent. A married couple with two children would receive $5,600 in direct payments. 

The bill also significantly expands the Earned Income Tax Credit (EITC) for 2021 by making it available to people without children. The credit for low and moderate-income adults would be worth $543 to $1,502, depending on income and filing status.

For families with children, the legislation expands the benefit of the Child Tax Credit (CTC) from $2,000 annually to $3,600 for each child under 6 and $3,000 for each child between 6 to 17 years old (the credit previously excluded children age 17). Those amounts will also be available to all low-income families even if it exceeds the amount they paid in taxes

In previous years, the CTC was claimed when a person filed their tax returns. But starting in July, the CTC will be paid out on a monthly basis at a maximum rate of $300 per child. For example, a family with two children under 6 would qualify for $600 a month in CTC payments until December. (The other half of the CTC, for January to June 2021, will be paid when people file their tax returns.)

These payments are expected to have an immediate effect on the level of poverty in the U.S.

The poverty threshold for a one-person household is $12,880 a year (for comparison, a person working full time (2,080 hours per year) at the federal minimum wage ($7.25) would earn $15,080 a year). The threshold for a two-person family is $17,420, and $26,500 for a family of four.

The average relief benefit to the individual (i.e., $1,400 for the direct payment and roughly $1,000 for the EITC) would give them an additional $2,400, about 18.6% of the annual income needed to cross the poverty threshold (the equivalent to 331 hours—8.3 weeks—of minimum wage pay). For a family of two, it would provide 31% of the necessary annual income.

The benefit is most helpful, though, to a family with children. A two-parent family with two children under the age of 6 would receive $5,600 immediately, about $1,500 for the EITC, and  $7,200 in child tax credits—a total of $14,300, or 54% of the poverty threshold. 

How would the American Rescue Plan affect overall poverty?

An analysis by the Center on Poverty and Social Policy at Columbia University found the legislation could cut the overall poverty rate in the U.S. from 12.3% to 8.2%, and reduce the level of poverty for children under 18 from 13.5% to 5.7%.

What is the Family Security Act?

The change in the CTC under the American Rescue Act is similar to the Family Security Act, a proposal offered last month by Sen. Mitt Romney of Utah. The proposal would create a child allowance of $4,200 per child under age 6 (to be distributed at $350 per month) and $3,000 per child ages 6 to 17 (to be distributed at $250 per month). The maximum allowance per family would be $15,000 per year, or $1,250 per month. Unlike the change in the relief bill, which put no cap on the number of children, Romney’s plan would limit the benefit for families that have four or more children under the age of 6 or six or more children from the age of 6 to 17 to $15,000 a year. 

Eligibility would be available to parents four months before the child’s due date. The child allowance would also be available to families with no income and would only phase out for the highest-earning households (single filers making more than $200,000 and joint filers making more than $400,000).

This plan would repeal the current Child Tax Credit (CTC), which is currently administered through the tax code and is worth a maximum of $2,000 per child. The CTC is subject to a $2,500 minimum-income requirement, a phase-in rate, and a maximum refundability of $1,400 for workers with no tax liability to offset.

Romney’s plan would also reform the EITC by eliminating marriage penalties, reducing improper payments and IRS audits, making it easier for families to claim the correct credit, and maintaining the adult dependent component of the EITC separately to ensure no family earns less than the EITC in its current form.

A two-parent family with two children under the age of 6 would receive about $1,500 for the EITC and $8,400 in child tax credits—a total of $9,900, or 37.3% of the poverty threshold. 

How would the Romney plan affect poverty?

According to the Niskanen Center, Romney’s child allowance would reduce U.S. child poverty by roughly one-third and deep child poverty by half. They estimate the total poverty rate would decrease from 11.67% to 10.06% while the child poverty rate would decrease from 12.41% 8.37%. 

How much would these proposals cost?

The cost in the American Rescue Plan to provide $1,400-per-person stimulus checks to all Americans—not just those in poverty—is $422 billion. To expand the Child Tax Credit, Child Care Tax Credit, and Earned Income Tax Credit for all citizens for one year adds an additional cost of $143 billion. Because there are no offsets to that spending, it adds $565 billion to the federal deficit.

Under the Family Security Act, the estimated cost to expand the child benefit would cost $229.5 billion annually, which is $112.5 billion more than the current CTC. To pay for the expanded child benefit, the plan would make $66 billion in federal tax and spending offsets.

The Romney plan would eliminate head of household filing status, eliminate the Child and Dependent Care Tax Credit, eliminate the itemized deduction for state and local taxes paid, and eliminate Temporary Assistance for Needy Families. The plan would also change some eligibility for the Supplemental Nutritional Assistance Program. The reformed EITC would cost $24.5 billion annually—about $46.5 billion less than the current EITC.

By / Jun 26

Southern Baptists affirm tax policies that incentivize charitable giving. Both families and governments hold an interest in charitable giving so that the voluntary sector of our nation realizes its fullest potential. The institutions of a healthy civil society–houses of worship, poverty relief, education, the arts, and more–depend on charitable giving. Therefore, we object to any tax policy that would have a chilling effect on charitable giving. 

The ERLC affirms that churches, nonprofits, and the services they provide are integral to a functioning and flourishing society. During the COVID-19 crisis, their aid is in need now more than ever. When the devastating economic effects of the COVID-19 pandemic began to take hold in March 2020, many nonprofits and houses of worship were on the frontlines of serving our nation’s most vulnerable, and providing hope and community to people who are searching for meaning during this difficult time.

The Tax Cuts and Jobs Act of 2017 doubled the standard deduction, which means that most Americans no longer itemize their deductions. Under the federal tax code, people can only claim a deduction for charitable contributions if they itemize their deductions. Since the amount of people who itemize deductions has shrunk, many nonprofits are concerned there would be a drop in donations, because of the lack of incentive to give. The Charitable Deduction is the only deduction for which the taxpayer receives no other material benefit (compared with the mortgage interest deduction or tuition deduction). 

The bipartisan Universal Giving Pandemic Response Act would make available, for tax years 2019 and 2020, an above-the-line deduction for charitable giving on federal income taxes valued at up to one-third of the standard deduction. This expands the current above-the-line deduction for charitable giving made available by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March. Individuals who have filed their 2019 tax returns without itemizing deductions may file an amended return to be eligible for the benefits provided by the Act. 

The economic impacts of COVID-19 will be dramatic across all sectors of our economy, which will in turn impact charitable contributions to nonprofit organizations. Without dramatic action, many of these nonprofits will forever close their doors. The ERLC strongly urges Congress to swiftly pass the bipartisan Universal Giving Pandemic Response Act to provide much needed financial relief to the charitable sector, and houses of worship.

By / Dec 21

WASHINGTON, D.C., Dec. 21, 2019—Lawmakers in both the U.S. House of Representatives and the Senate passed and President Trump signed an appropriations package that included a repeal of the troubling tax on all nonprofits, including churches.

Russell Moore, president of the Ethics & Religious Liberty Commission of the Southern Baptist Convention, commented on this welcomed relief for churches and nonprofit organizations throughout the country.

“In these contentious days, finding a bipartisan area of agreement in Congress is worth celebrating. I am thankful that the House and the Senate did just that by repealing the parking lot tax on nonprofits and houses of worship in their appropriations bill. This repeal comes as a welcome relief for millions of Americans, lifting this burden from nonprofits and houses of worship around the country. Churches must never again be seen as untapped sources of government revenue. I am thankful that House and Senate leadership, along with many elected officials, worked hard on this issue. And I’m glad to see the President formalize this repeal with his signature.” 

This relief for thousands of nonprofits and houses of worship, as well as the millions of Americans who they serve, comes two years after the Tax Cuts and Jobs Act of 2017 brought with it this small provision with such significant consequences. This effort to repeal the provision was a top priority of the ERLC policy team, and its success was the result of the collective advocacy of hundreds of groups representing an array of diverse faith communities and nonprofit organizations.

As a sign of the fundamental American recognition of the separation of the state’s authority from the church, the repeal of Section 512(a)(7) was overwhelming and bipartisan. The work to repeal grew over time in both chambers of Congress among members of both parties. Significant developments, in addition to this month’s inclusion in the appropriations packaged, included:

  • The Lessening Impediments From Taxes (LIFT) for Charities Act was introduced in the House by Representatives Mark Walker (R–N.C.) and Tom Suozzi (D–N.Y.) and in the Senate by Senators James Lankford (R–Okla.) and Chris Coons (D–Del.).
  • House Majority Whip James E. Clyburn (D–S.C.) authored a bill to repeal the tax, H.R. 6504 Stop the Tax Hike on Charities and Places of Worship Act.
  • The House Ways and Means Committee included a repeal of the non-profit parking tax in Sec. 401 of Chairman Richard Neal’s Economic Mobility Act of 2019.
By / Aug 14

“Whatever one thinks about trade policy, the Bible should never have been a subject of this sort of taxation,” stated Russell Moore, president of the SBC’s Ethics and Religious Liberty Commission (ERLC).

“With as many Bibles as are printed in China, the news that they will not be subject to such tariffs is welcomed news for LifeWay and other publishers of God’s holy Word,” he stated. “Even still, it is concerning that trade books and educational materials—also vital to the lives of Christians and churches—are still subject to a tariff. My hope is that this too will be addressed promptly.”

Read the full story here.

By / Nov 28

Now that the consumer-focused shopping events Black Friday and Cyber Monday have passed, many Americans will be supporting #GivingTuesday. This global event is the unofficial marker for the start of the charitable season, when many focus on their holiday and end-of-year giving.

One of the main reasons charitable giving increases in December is because of the tax implications. As the year closes, so does the deadline for being able to make contributions that will increase the amount that can be claimed under the Charitable Deduction.

According to the IRS, taxpayers may deduct charitable contributions of money or property made to qualified organizations if they itemize their deductions. Generally, a taxpayer may deduct up to 50 percent of their adjusted gross income, but 20 percent and 30 percent limitations apply in some cases. This deduction has a profound effect on charitable giving, but has been undercut by the both the standard deduction and the requirement to itemize deductions.

This wasn’t always the case. Soon after the U.S. federal government passed the first law implementing a tax on income in 1913, many Americans became concerned that the new tax would decrease giving, particularly in a time of increased wartime tax rates. The Charitable Deduction was thus included in 1917 to provide an incentive and to offset the effect of taxation on giving.

Here’s why ERLC calls for Congress to extend the Charitable Deduction to 100 percent of taxpayers.

When it was first implemented, most income taxes were paid by the wealthy. But because of federal spending after the Great Depression and during World War II, the government needed to expand the tax base. By the mid-1940s, approximately 75 percent of the American population was paying federal income taxes. The process of calculating taxes and deductions was complex, though, so in 1944 the federal government implemented the first standard deduction.

The standard deduction—a set dollar amount that reduces the amount of income on which a taxpayer is taxed—made tax-filing simpler, and by 2014 only 30 percent of households still chose to itemize deductions. But while this was an improvement for most taxpayers, it reduced the number of people who were eligible for the Charitable Deduction.

The current tax reform plan would decrease that number even more as it increases the standard deduction and eliminates many other deductions. If the current tax reform is passed less than 5 percent of taxpayers able to claim the Charitable Deduction. This could have a devastating effect since research has shown that increasing the standard deduction has a negative effect on charitable giving for both religious congregations and other charities.

Fortunately there’s a simple solution to this problem: create a Universal Charitable Deduction. Extending the Charitable Deduction to 100 percent of taxpayers, not just those who itemize, would have the immediate effect of increasing total charitable giving. A study by the Indiana University Lilly Family School of Philanthropy finds that extending the charitable deduction to non-itemizers would increase charitable giving by $12.2 billion (4.3 percent) and decrease tax revenue by $13.1 billion (-0.5 percent). The net difference between charitable giving and tax revenue would be -$0.9 billion (-0.03 percent).

As a new white paper produced by ERLC notes, the beneficiaries of the Charitable Deduction are those served by charity. Institutions of civil society remind us we are not merely economic units managed by a government bureaucracy. Rather, we have obligations to one another as neighbors. In an era where government budgets are already under high pressure, the last thing lawmakers should do is risk the viability of private sector charity. When private sector charities reduce or cease operations their clients have few options other than to join government social service programs, which in turn burdens government budgets.

For these reasons ERLC calls for Congress to extend the Charitable Deduction to 100 percent of taxpayers, not just those who itemize. A Universal Charitable Deduction would incentivize all taxpayers, not just those in upper income brackets who itemize their deductions.

Current legislative proposals that would allow above-the- line deductions for individuals not itemizing include Senator James Lankford’s S.2123 and Congressman Mark Walker’s H.R. 3988. Both of these amendments would amend the Internal Revenue Code of 1986 for an individual who does not elect to itemize his deductions to claim the charitable deduction up to one-third the value of the standard deduction.

It’s time the government should encourage the voluntary financial giving of all citizens, at all levels of income. As Americans open their hearts and wallets to contribute to support their favorite charities, the government needs to give all taxpayers a way to avoid being taxed on their generosity.