It wasn’t just the child tax credit money that allowed Sweetrica Baker to feel comfortable enough financially to buy a house. But the $750 a month she’s been getting since July did prompt her to reevaluate her budget, and after talking over the idea with some close friends, she decided she could swing it.
Now she’s waiting for the final inspections before closing.
The six months of monthly payments to Baker and millions of other Americans is drawing to a close with December’s payment. And though Congressional Democrats are pursuing extending the program through President Joe Biden’s signature domestic policy bill, Build Back Better, the future of the program is unclear. The Democrats’ only holdout, West Virginia Senator Joe Manchin, said Sunday he wouldn’t vote for the bill, and there are reports that he objects to the child tax credit in particular. So far, no Republican has said they’re in favor of the bill.
MLK50: Justice Through Journalism has followed Baker, 42, as she’s received the tax credits and considered the best way to spend the money. In September, that mostly meant new school uniforms and school supplies for her three boys, ages 15, 7 and 6. She’d also put some into savings, in part for a trip to Disney World for her and her children.
Buying a house has long been a dream for Baker, who works as the secretary of operations and digital organizing at the Memphis AFL-CIO Central Labor Council. In September, she called moving a “no-brainer.” Now, her older son will have his own bedroom, while her younger boys will happily share a room for the next few years, she said.
Baker estimates that about 85% of her child tax credit payments will go to the closing costs on the three-bedroom house in the Vollintine-Evergreen area. It also has a sizable backyard, a basement and a covered carport, Baker said. It still needs some work – on the roof, the doorways, some of the wiring and the plumbing, among other things – before the family can move in, but the goal is to be settled in mid-January.
Baker said she’s “elated” that she’s able to buy the house.
“When I finally move, I can be like, this will be my home for at least 25 years,” she said.
“And I may not stay in this home, you know, for that long, but the fact that I will be in a place that I don’t have to move. Like my childhood, we moved a whole lot. There was a lot of instability. And so that has always been a goal, to have stability for my kids and not move them around from school to school to school, city to city. And so for me, it’s like a goal that I finally reached.”
The tax credits undoubtedly helped Baker take the time to examine her finances, but as a frugal mom, she never viewed the tax credits as anything but a bonus. She didn’t add them to her budget, and never planned on relying on them. In addition to the money she allocated to closing costs on the house, Baker said she spent a little of the tax credit on clothes for her sons and needed car repairs.
The benefits were “huge” for children, said economist John Gnuschke, former director of the Sparks Bureau of Business and Economic Research at the University of Memphis.
In July, Gnuschke said the money would be a “major injection” into the local economy. It’s not clear yet how the credits affected Memphis, but recipients will undoubtedly feel the loss of the credit, especially as inflation grips those with lower incomes.
“For people with children, are food costs higher or lower, child care costs or the cost of schooling higher or lower, gas prices higher or lower? If you cut or eliminate the benefits for child care, will more children be in poverty or less?” Gnuschke said in an email. “Families will face higher costs and have less income. How can that be a good outcome for children and families in America? If we are concerned about family health, income levels, poverty and education, how can we cut benefits for the same people?”
The tax credits were a yearlong program, with half of the money distributed to families monthly between July and December of this year. The remainder will be paid out in a lump sum when families file their taxes in April 2022.
The expanded tax credit made more money available to more people. It includes children up to age 17 when previously only children younger than 17 were eligible. It also makes the credit available to families regardless of whether they owe taxes and it increases the amount of money per child by as much as $1,600 (from $2,000 for all children to $3,600 for children under 6 and $3,000 for children between 6 and 17).
An Urban Institute report found that in a typical year not marked by massive unemployment spikes and economic upheaval, the expanded credit would cut child poverty by more than 40%, lifting 4.3 million children out of poverty.
The Treasury Department estimated that families of 61 million children received the monthly credit. In total, the federal government paid out almost $93 billion over six months. This month in Tennessee, 1,298,000 children qualified, the department said, and payments averaged $446 per family.
Nearly 22% of Memphians live in poverty, according to census data from the 2020 Memphis Poverty Fact Sheet, compiled and released by Elena Delavega, associate professor of social work at the University of Memphis, and Gregory M. Blumenthal of GMBS Consulting.
The Memphis poverty rate is more than double the nation’s 2019 poverty rate of 10.5%. But the rate of poverty is not borne evenly across the city, with 26% of Black Memphians and 29% of Latinos living below the poverty line. That’s compared to slightly more than 9% for white Memphians.
Even if the credits aren’t extended, Baker’s still confident in her ability to manage her finances because she never relied on the extra money, and buying the house has made her more aware of how she spends.
“At first it was like we have extra, let’s just do this, let’s just buy that, let’s just go and do,” Baker said. “And now it’s like nope, we’ve got to make sure we have money in the bank. So if anything changes, we can handle it.”
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