WASHINGTON, March 11, 2021 – Today, President Biden signed the American Rescue Plan into law, sending necessary relief to communities and populations across the country that have been hardest hit by the coronavirus pandemic. In addition to funding for vaccine outreach and distribution to directly fight the pandemic, the law also provides crucial economic supports, including housing and utility assistance, increased health care access, nutrition assistance for families, unemployment compensation extensions, funding to reopen schools, needed resources for small businesses and farms owned by persons of color, and expansions of refundable tax credits.
The National Community Action Partnership (NCAP) specifically applauds the overdue shift toward direct assistance and fully refundable tax credits as a poverty-fighting strategy. Today’s legislation builds on brain science, which tells us the first years of a child’s life are critical to long term development and that the toxic stress of poverty has the potential for serious long-term impacts. By creating an income floor for households with children, the American Rescue Plan interrupts the trauma of poverty and will cut child poverty in half, with an even steeper reduction in child poverty among communities of color.
“This is a ground-breaking moment in our nation’s history,” said Denise Harlow, NCAP CEO. “The American Rescue Plan takes research from the National Academies of Sciences, Engineering and Medicine and puts it to work. Research to practice in real time to help families across America.”
Since our creation in 1964, Community Action Agencies across the country have had a front row seat to increasingly restrictive, inequitable, and sometimes overly complex program requirements. Local Community Action Agencies have a long history of assisting taxpayers in accessing tax credits and refunds through programs like the Volunteer Income Tax Assistance (VITA) program and we understand the crucial role additional cash plays in allowing families to achieve their full potential. The law’s tax credit provisions, especially the expansions of the Child Tax Credit and Child and Dependent Care Tax Credit, correctly prioritize low- and very low-income families in our communities.
The American Rescue Plan:
- Increases the maximum Child Tax Credit (CTC) from $2,000 to $3,000 per child 6-18 and $3,600 per child under 6, makes the credit fully refundable, and allows advance periodic payments to families.
- Increases maximum Child and Dependent Care Tax Credit (CDCTC) amount from $3,000 to $8,000 for one dependent and from $6,000 to $16,000 for two or more dependents, makes the credit fully refundable, and increases income-based eligibility phase-outs.
- Expands the Earned Income Tax Credit (EITC) for workers without children and eliminates age eligibility requirements.
- Provides $1,400 recovery rebates to individuals who make $75,000 or less and $1,400 for each one of their dependents, regardless of age.
- Includes $1 billion in Pandemic Emergency Assistance for states, territories and tribal organizations to provide non-recurrent short term benefits.
- Includes debt forgiveness and grants to support farmers and ranchers of color.
- Includes $400 million for the FEMA Emergency Food & Shelter Program.
Under the CTC changes, a single parent making less than $75,000 per year with two children aged 5 and 10 would receive a monthly payment of up to $275. The CTC expansion will lift 4.1 million children out of poverty, including 1.2 million Black children and 1.7 Latinx children.
While NCAP is heartened by this paradigm shift in the way policymakers view the causes of poverty in our communities, we are mindful that these provisions are only temporary, many expiring at the end of 2021. NCAP is committed to working with Congress and the administration to permanently codify the American Rescue Plan’s prioritization of direct assistance and refundable tax credits in the fight to end poverty in communities across America.
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