A Universal Child Allowance to Combat Child Poverty

Raising children is costly. In the United States, approximately 1 in 5 children live in households with incomes below the federal poverty line, and many others live in families that struggle to meet their children’s needs month in and month out.

Poverty, income instability, and financial strain are detrimental to the health and development of children—in fact, they are some of the greatest threats to a child’s long-term health and wellbeing and future productivity. Numerous high-quality studies have conclusively demonstrated that increased family income, particularly at children’s early ages, pays long-term dividends to children’s health and development, as well as their eventual adult outcomes.

These early investments can also make long-term fiscal sense as well. Better adult outcomes like increased educational attainment, employment, and earnings translate into lower future expenditures on public benefits and programs and increased tax revenue.

Since the late 1960s, the idea of a universal child allowance, which would provide a regular monthly cash grant to all families with children, has garnered attention from researchers and policy makers. In peer countries such as Australia, Canada, France, the UK, and many others, the universal child allowance is viewed as a core element of the modern safety net, one that substantially reduces the rates of child poverty and helps all families with children meet their children’s needs even when facing a health challenge, job loss, or other income shocks.

Given the historical effectiveness of these cash payments, we recently joined forces with some of the top poverty scholars across the country to put forward a policy proposal for a universal child allowance that would make a significant dent in child poverty.

 Our proposal would convert the Child Tax Credit (CTC) and child tax exemption into a universal monthly child allowance. The proposal promotes universality, accessibility, and adequate payment levels, with the possibility of more generous support for families with young children.

Universality would guarantee eligibility to all children in the United States and the support would be accessible in the form of monthly electronic benefit transfers of $250-$300 per child to meet a family’s most basic child-related needs for items such as books and toys, food, clothing, housing, and even diapers. We consider three variations of the child allowance:

• A simple model: Monthly payments of $250 a month per child regardless of age.
• A tiered model: Monthly payments of $300 per child under age 6, $250 per child age 6-17.
• A tiered and equivalized model: Monthly payments of $300 for the first child under age 6 and $250 for the first child age 6-17, with a reduction in the amount per child for subsequent children in the household.

In each case, payments would be taxed back at a marginal tax rate and would replace the existing CTC and the child exemption. But, critically, benefits would reach every child in America. Estimates of annual net costs of this proposal range from $69 billion to $108 billion (on top of the savings generated by the elimination of the CTC and child exemption).

The child allowance would have a dramatic effect on child poverty. Estimates using the Current Population Survey for 2015 indicate that the proposal would reduce child poverty by over 40 percent, child deep poverty (those living in families below 50 percent of the poverty line) by 50 percent, and would virtually eliminate extreme poverty or children living in households with less than $2 a day in income.

A universal child benefit is a long-standing idea and is by no means radical: in fact, almost every other wealthy democracy in the world embraces the concept, essentially guaranteeing an income floor for all children.

While legislators would need to determine the appropriate financing, our proposal for a Universal Child Allowance would provide effective and far-reaching child poverty relief and crucial support to families from across the income distribution. Evidence for the benefits of such policy is widespread among our peer countries. It is time to provide a solid foundation beneath our children’s future.

Chris Wimer is Co-Director of the Center on Poverty and Social Policy at Columbia University, Jane Waldfogel is a professor of social work and public affairs at Columbia University, and H. Luke Shaefer is director of Poverty Solutions at the University of Michigan.

Coauthors of their recent report on the universal child allowance include Sophie Collyer, Greg Duncan, Kathryn Edin, Irwin Garfinkel, David Harris, Timothy Smeeding, and Hiro Yoshikawa. The full proposal is part of a series of new antipoverty proposals discussed in a forthcoming issue of RSF: The Russell Sage Foundation Journal of the Social Sciences