Recently, Rep. DeLauro and most of the House Democratic Caucus reintroduced legislation that would expand the Child Tax Credit (CTC) back to its 2021 level. While expanding the CTC would be beneficial for millions of families with children, House Democrats should be backing The End Child Poverty Act, which achieves the same goal as the CTC but in a better-designed way.
This aside, the reintroduced CTC legislation includes a new provision that increases the monthly payment of $300 to $2,000 for the month that a baby is born. Families would receive $5,300 instead of $3,600 for the first year. This essentially acts as a $1,700 “baby bonus” for families with newborns.
This type of benefit is common internationally but is often intertwined with paid family leave programs. The U.S. is the only developed nation without paid family leave. Only a few states offer programs, and even those have eligibility requirements that, on average, exclude one-third of potential mothers. Rep. DeLauro’s Baby Bonus could improve the lives of millions of families who lack access to parental benefits. However, the provision has a few issues that need to be addressed.
The Baby Bonus and larger CTC are administered through the tax code and include an income test. This presents two immediate problems:
- Many low-income families who are not required to file taxes will decide not to. This means they will be unable to collect the CTC and the Baby Bonus. The main reason behind the Baby Bonus and CTC is to support low-income families. The current provision will fail to reach many of them.
- Having an income test for an advanced payment will create administrative burdens and potentially painful benefit clawbacks. This will waste money that could otherwise be spent on direct assistance to families.
Additionally, the Baby Bonus does not capitalize on one of the key rationales for its existence: providing benefits before the baby is born.
There is an extensive list of items that expecting parents have to purchase before their child enters the world. A crib, formula, clothes, diapers, a car seat and blankets are just a few essential goods families need. Low-income families, in particular, may find it difficult to purchase all of these items. But, the Baby Bonus provision, as currently written, would not send any benefits until after the child is born.
Instead of tying the Baby Bonus to the CTC, a separate program should be established to create a Universal Parental Grant. To achieve this, the following changes to the legislation should be made:
- The Social Security Administration (SSA) should administer the new program. The SSA already sends out benefits to various groups and it can easily support an additional program. When children are born, they are already immediately registered with the SSA, typically in the hospital where they are born. Using the SSA thus ensures that families who do not file taxes still receive the grant.
- The program should be universal, meaning that every family expecting a child should receive a parental grant. There should be no phase-out like the one found in the CTC. Having a universal program eliminates administrative hurdles and any potential clawbacks. If policymakers do not want wealthy families to net gain from the introduction of the benefit, they can increase their taxes rather than instituting a benefit phase-out.
- Families should be allowed to receive the grant before their child’s birth. The way this would work is that families would sign up for the program during pregnancy and declare their child’s expected due date. The benefit would then be sent up to two months before the due date so families can purchase essential goods ahead of time. Families who do not sign up beforehand would still collect the grant after their child is born when they register their child with the SSA.
A program designed this way would be more effective at delivering benefits to families than the proposed legislation. Creating a Universal Parental Grant would also show the wisdom of universal benefits broadly and hopefully convince more policymakers to abandon means-tested programs. A Universal Parental Grant is a simple way to ensure all families are prepared to welcome their child into the world. House Democrats should strongly consider these revisions.