The last year has been a difficult one financially for 44-year-old Rocky Harper. Inflation, especially, has eaten into his paychecks that support his family of four.

“I had to switch careers last year to become a truck driver, because my old job could not pay my bills anymore. Now I have to spend all this time away from my family just to pay the bills,” the Arizona resident told Yahoo Finance while on the road in South Dakota. “My wife is at home basically as a single parent with two kids, and I’m out here just making money and living in the truck.”

Another factor that’s compounded Harper’s money struggles in the last year: No more monthly Child Tax Credit (CTC) payments.

“The credit helped me start catching up again and then it disappeared and inflation went up,” he said.

The enhanced credit — which increased the amount of the tax benefit and doled out half the credit in advance in monthly installments in 2021 — expired at the start of 2022 with little political muscle to make the pandemic-era changes permanent. That could change after President Biden included the CTC in his annual budget released this month.

While the budget itself has little chance of becoming law with the GOP in control of the House of Representatives, the CTC’s inclusion may rekindle debates over its merits, especially as inflation continues to erode more budgets, credit card delinquencies start to rise, and government food aid shrinks.

“Those expansions were really exciting to see being revived in the president’s budget. All the pieces are critical – monthly payments and giving families more money, also making those credits refundable so that our lowest-income families can access them,” Joanna Ain, associate director of policy at Prosperity Now, told Yahoo Finance. “That would be huge.”

How the expanded Child Tax Credit worked

The temporary expansion of the Child Tax Credit enacted under the American Rescue Plan in March 2021 broadened the benefit in several key ways that helped many of the economically vulnerable.

First, the maximum credit amount was raised from $2,000 to $3,000 for each child between 6 and 17 and $3,600 for children under 6. The age limit was also increased to 17 for the first time. Before, the maximum age limit was 16.

Lawmakers also made the CTC fully refundable, meaning if you didn’t owe taxes, you still qualified for the entire credit. Before, only $1,400 of the $2,000 credit was refundable. The American Rescue Act eliminated the minimum income requirement — which before was $2,500 — allowing those without jobs to qualify for the first time.

“The other thing that happened is we also delivered half of the credit in advance of filing your tax return,” Elaine Maag, a senior fellow at the Urban-Brookings Tax Policy Center, previously told Yahoo Finance. “Almost all families with children started getting payments in July, and they received a monthly payment from July to December [2021].”

Roughly 35 million taxpayers with 60 million children received half of the credit in monthly installments from the Internal Revenue Service in 2021. Meanwhile, families that had opted out of getting the advanced payments could claim the full credit on their 2021 tax return.

“The monthly CTC was extraordinarily flexible and helped parents and children in ways other government programs couldn’t dream of,” Greg Nasif, director of public affairs at Humanity Forward, told Yahoo Finance. “You can’t subsidize child care in rural Montana towns that don’t have daycare centers. But by reverting the CTC to monthly payments, you can shift resources toward family budgets and let parents figure out what their families need.”

CTC offered ‘the opportunity to invest in children’

The expanded Child Tax Credit appeared to have an almost immediate, positive impact.

By December 2021, the monthly tax credits were keeping 3.7 million children from experiencing poverty, the Center on Poverty and Social Policy at Columbia University found, up from 3 million when the credits first rolled out. The payments also reduced the monthly child poverty rate by 30%.

Several studies also showed that the monthly payments helped safeguard family finances during the pandemic. During the fall of 2021, American households consistently reported using the CTC to cover basic needs such as food, rent or mortgage, and utilities, according to the Census Bureau.

That was the case for Zebulon Newton, a North Carolina resident, who received his last CTC payment of $550 for his daughters, ages 4 and 7, in December 2021.

“For six months, childhood life got better,” the 40-year old father told Yahoo Finance last year, noting that he used the money for child care and to put healthier food on the table.

“Maybe the credit amounts weren’t necessarily life-altering for some, but they gave the lowest-income families who historically have been shut out of these programs the opportunity to invest in children,” Christopher Wimer, co-director of the Center on Poverty and Social Policy at Columbia University, told Yahoo Finance. “For the first time, many were able to just get through the day a little easier.”

Rising inflation poses new challenges

Those benefits began to disappear after the last payments went out in December 2021 and as inflation began to rage. Over a year later, inflation has eased some, but prices for food, rent, and utilities still remain high.

“Lower-income households experienced above-average inflation because of their higher proportional spending on food and housing,” the New York Federal Reserve said in a blog post.

Since June of last year, around 40% of adults surveyed by the Census Bureau have reported some difficulty with paying regular household expenses. To offset some of the financial blow, a rising share of Americans have been relying on credit cards — with balances hitting a record high in the fourth quarter and missed payments starting to increase.

The percentage of adults who reported food scarcity has also increased, ticking above 11% in April 2022 and remaining there. When the CTC payments were disbursed, the share had dropped as low as 7.8% in August 2021.

"We know what it's like to be hungry,” Harper said. “We didn't eat for days, but [our children] did. They are eating, but not nearly as nutritious as before.”

Food insecurity could grow even more now that the pandemic-era Supplemental Nutrition Assistance Program (SNAP) benefits also expired at the end of February 2023 for households in 35 states. The other 15 states already ended the extra help earlier.

On top of that, tax refunds — often a lifeline for those who earn the least — are coming in smaller than last year because so many COVID-19 enhancements including the CTC expired.

“Tax refunds are going down, the SNAP benefits are expiring and inflation is just punching a hammer, blowing into these families again and again,” Ain said. “That acknowledgement in the budget to have the opportunity to reboot, put these [CTC] expansions back into place is good. We’re going to keep pushing and work with Congress to get them back.”

New CTC expansion probably won’t look like the 2021 version

As Congress possibly revisits an expansion of the Child Tax Credit, it’s likely that any new version won’t look like its pandemic predecessor in order to garner bipartisan support. Some Republicans have expressed concerns that the CTC would be inflationary and that one version without work requirements would disincentivize work.

One potential compromise would be to adopt provisions from the Republican-led Family Security Act 2.0, introduced by Sens. Mitt Romney (R-UT), Steve Daines (R-MT), and Richard Burr (R-NC). The proposal calls to increase the maximum value of the CTC to $4,200 per child under the age of 6 and $3,000 for those between 6 and 17.

Unlike the enhanced CTC from the American Rescue Act, Romney’s proposal requires families to earn a minimum of $10,000 to receive the full credit. Part of the funding would also come from financial cuts to the Earned Income Tax Credit and the elimination of the Child and Dependent Care Tax Credit, which would impact low- to moderate-income households the most, according to the Center of Budget and Policy Priorities.

“The proposal has a lot of limitations,” Dolores Acevedo-Garcia, director of the Institute for Child, Youth and Family Policy at Brandeis University, told Yahoo Finance. “If you're proposing to improve the Child Tax Credit, what you're trying to do is reduce child poverty. Some of the ideas are in the right direction, but it also does a couple of things that are actually detrimental to children in poverty and would exclude some children.”

For Harper, he’s still hoping some compromise can happen on Capitol Hill that revives the credit. The sooner, the better.

“I don't want to seem like I'm complaining, but I know how everyone's having a tough time,” he said. “Congress has got to pull their thumb out of their ass and do something about it. We care about paying our electric bills.”

Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.

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