How the Child Tax Credit is impacting Colorado families

Photo: Amber Varwig

By Robert Davis

Money is often tight in the Varwig household, which includes three children under the age of five, and a grandmother who needs live-in care.

So, when federal lawmakers expanded the Child Tax Credit (CTC) program through the American Rescue Plan back in June, Amber Varwig, the family matriarch, thought it would be worth it to apply to boost the family budget. 

“For a woman in my tax bracket, so to speak, the money can be life-changing,” Varwig told the Denver VOICE. 

The COVID-related relief program provides payments of $300 per child under six years old and $250 per child over six. CTC payments are made in monthly installments by the Treasury Department and began going out in July. However, expansion is scheduled to sunset at the end of the year.  

Deputy Treasury Secretary Adewale Adeyemo described the program as one that is “meaningfully improving the lives of children in every corner of the country,” while Sen. Michael Bennet said the program proves that “we don’t have to accept childhood poverty as a permanent feature of our economy.”

The Treasury has distributed more than $61 billion to families as of October 15, according to agency data. More than $1 billion of that total has gone to Colorado households over the first four months of the expanded program.

Approximately $256 million in CTC payments went to 600,000 Colorado families with more than one million eligible children in October. Families received an average payment of $428, which is slightly below the national average, according to data from the Treasury. 

Data from the Census Bureau’s weekly Household Pulse Survey also shows that the program has decreased housing and food insecurity for many Coloradans. Nearly one in four families that received a CTC payment last week spent it on housing and food, according to the latest survey. 

President Joe Biden’s Build Back Better Plan includes a one-year extension of the CTC program, though it would revert the maximum payment down to $2,000 per child from the current $3,000 to $3,600 cap. The program would also remain fully refundable, meaning the poorest families will continue to qualify for it even if they don’t make enough to file taxes. 

“After decades of spending $5.6 trillion on two wars in the Middle East and $5 trillion in tax cuts for the wealthiest people in America, we finally are on the cusp of making historic, overdue investments in the American people,” Sen. Bennett said in a statement. “We will make the Child Tax Credit available to nearly every family in America.”

However, the household survey data also reveals racial and economic disparities in terms of which families received CTC payments and how those funds were spent. 

For example, 62% of Colorado families who received a payment in October were college-educated white families. At the same time, a simple majority of CTC payments went to households with a combined income of more than $75,000 per year. 

White families were also more likely to spend their CTC payments than Hispanic and Black families. Sixty-three percent of Black families used their CTC payments to pay down debt compared to 48% of Hispanic families and 26% of white families. Meanwhile, nearly 40% of white families reported “mostly spending” their CTC payments compared to 30% of Hispanic families and 36% of Black families. 

Research from the National Women’s Law Center (NWLC) found that these disparities exist across the nation. The organization found that the gaps were born from white families being more likely to claim the CTC on their tax returns while other eligible households failed to do so. Meanwhile, another 20% of respondents surveyed by the organization reported not knowing about the program. 

NWLC said these findings are “especially relevant as community organizations and the [federal] government are currently working to provide outreach to parents about the CTC and the urgency of filing a tax return in 2021.”

But, some families that are receiving CTC payments report experiencing issues receiving their full allotment. Varwig received a letter from the Treasury over the summer telling her she qualifies for $900 in monthly CTC payments because she has three children. However, each of her payments thus far has been $750 and she says attempts to rectify the payments have been futile thus far. 

Analysts at the University of Michigan’s Ford School of Public Policy say addressing these obstacles for low-income families will boost the CTC’s effectiveness at reducing housing and food insecurity as well as child poverty rates. Some solutions include providing tax filing services and increasing access to banking for eligible families. 

For families like the Varwigs, the CTC program means much more than an additional paycheck. 

“It would mean a vehicle so that my disabled mother and three very small children don’t have to freeze in the snow waiting on buses and trains like we do every year,” Varwig said.