In their new $ 1.9 trillion stimulus bill, the Democrats temporarily converted the current child tax credit into a higher “child benefit” to be paid to parents regardless of whether they work or pay taxes. This has sparked a debate over whether the law will revitalize wellbeing as we knew it before a generation ago made those benefits conditional on parents’ participation in work or education. However, the fine print of the law shows that these new benefits would surely flow where welfare checks have never been before – potentially millions of parents who do not live with their children and could withhold thousands of dollars in erroneous payments each year.

The rules of child benefit seem straightforward. Children under six are paid $ 3,600 per year while older children are paid $ 3,000. Monthly shares could flow in July and would be sent regardless of whether parents work or pay taxes – assuming nominally a child lived with them for more than six months a year.

But not every child lives with the same parent for the same amount of time from year to year, which means that if the child’s circumstances change recently, some payments – including monthly prepayments from this year onwards – could go to the wrong parent. To address this issue, child benefit offers an unusual answer: parents or other adults who receive erroneous payments – because the child did not live with them – can withhold up to $ 2,000 in misconduct per child if their annual single income falls below $ 40,000 Taxpayers or slightly higher for other households.

The Liberal Center for Budget and Political Priorities (CBPP) described a typical scenario:

For example, the father of a child may have claimed the child in the previous year (2020), but the child can live with their mother in 2021. In this case, the father can receive advance payments for the 2021 child tax credit, but then learn that he is not entitled to the tax credit when filing his 2021 tax return because the child did not live with him that year.

For example, the father of a child under the age of six could incorrectly receive a monthly payment of $ 300 between July and December 2021, which equates to an erroneous payment totaling $ 1,800. If his income is low enough, he could keep the whole amount even though the child did not live with him. The child’s mother would then collect the $ 3,600 annual child benefit when she files her taxes in early 2022.

In fact, this policy provides parents with child living up to $ 3,600 and parents with child not living up to $ 2,000 the actual maximum annual payment of $ 5,600 per child and not as advertised $ 3,600. Increased payments would likely flow disproportionately to single-parent households, where changes in living conditions for children are more common, which would also result in a new marriage penalty.

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Payments for federal and state income taxes owed, reclaiming other benefit overpayments, and overdue child support payments cannot be reduced. This nonsensically means that even parents who owe child support can keep erroneous payments instead of these funds going to their child.

Millions of children and families could be affected, especially if these policies are made permanent, as the Democrats intend. As the CBPP notes:

We estimate that in any given year, more than 3 million children are living with a different adult than the previous year. We estimate that longitudinal data are used and a large proportion have modest incomes. “If each resulted in a mispayment of even $ 1,000, then $ 3 billion a year would be sent to adults who don’t have children.

A finance department newly hired to pay millions of child benefit checks has limited resources, and possibly limited resources, to investigate questionable claims about changing children’s lives in order to maximize payments. Such determinations are already a major problem with Earned Income Tax Credit (EITC), where a quarter of the payments are in error, in large part because the government cannot authenticate the eligibility because of the lack of the required data, including related with “Relationship and Residence Requirements.”

These new payments would even outperform the pre-reform welfare system, in which checks were reserved for parents with whom children lived. For the first time, millions of parents have been able to receive and keep monthly federal checks even though their child lives elsewhere. This may increase children’s mobility, but not in the way policymakers normally intend.

Matt Weidinger is a Rowe Fellow in Poverty Studies at the American Enterprise Institute.

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