While the nation will feel the effects of the COVID-19 pandemic and its associated economic downturn for the foreseeable future, there were surprising economic benefits. In both Philadelphia and Pennsylvania, governments have seen budget surpluses unlike any in recent memory. However, reluctance to actually spend those funds due to wariness of future deficits among budget gurus has caused most of that money to remain in government coffers.
It is not wholly unexpected to find those in charge of the purse strings to be conservative by nature, considering many have clear memories of the 2008 financial crash and the dire projections and economic catastrophe caused by the pandemic. However, conservatism in a time of abundance in the name of stewarding budget windfalls as a talisman against future economic downturns is, to a certain degree, short-sighted.
Now is the time to get serious about poverty reduction, and Philadelphia may not have to look far to find a reasonable program that is proven to have a major impact.
According to a 2020 report issued by the Philadelphia Department of Public Health, nearly 35% (or roughly 119,000) of the city’s children lived in poverty, which was double the national average. The program proven to alleviate some of this burden was the expanded Child Tax Credit, now reduced to its pre-pandemic allocation of $2000 per child annually.
As a pandemic economic stimulus measure, the Child Tax Credit was expanded to $3600 per year for children under seven and $3000 per year for children aged seven-18. But the program did more than stimulate the economy-it reduced poverty by a staggering 30% nationwide.
However, after 2021, the expanded program reverted to the original $2000 per year. Currently, the Biden Administration is working to reinstitute the expanded credits. Still, from what even casual congressional observers can glean, there is a long road to doing anything of use to the poor and middle class.
With that in mind, regardless of whether Congress makes the credits permanent, it would behoove the city of Philadelphia to institute its own form of Child Tax Credit. Twelve states have already instituted such programs, and 14 more have introduced legislation to that effect. While it would be more beneficial for such legislation to be passed in Harrisburg-the state is currently sitting on a $12 billion surplus, it would be unwise to wait for movement on that front.
Instead, a local plan could be the better option for both immediacy and simplicity. Remember, the city of Philadelphia is also sitting on a large surplus, and using some of those funds for poverty alleviation would also have a ripple effect in many positive ways.
Primarily, any investment in anti-poverty initiatives is also an investment in anti-violence efforts. The core motivator behind violence is poverty, and by simply investing in children, the city will make a short-term and long-term investment in stemming violence and crime.
There is also a positive economic effect. According to the Maine Center for Economic Policy, every dollar invested in a Child Tax Credit program generates $1.50-2.00 in local spending. This type of programming, generally speaking, is what has always driven the economy: more money in the hands of middle-class and poorer families is spent locally, thus driving a strong economic stimulus.
Now let’s get to the cost. Most people will tell you there should be no ceiling when investing in children. However, when it comes to making those actual investments, you begin to hear a lot of hemming and hawing about affordability. Well, the city of Philadelphia can definitely afford to do this.
There are many ways to implement a program such as this. Let’s first examine the numbers. Based on census data, there are roughly 120,000 children in Philadelphia living in poverty. If the city were to provide an extra $100 per month per child ($1200 per year) the total cost to the city would be $144,000,000. Now, that is an exceptionally large amount of money, and if you follow our budget coverage, you know most of the city’s revenue is accounted for before budget hearings begin.
However, there are ways for the city to develop additional revenue streams progressively, unlike the numerous regressive taxes the city foists upon all residents regardless of their ability to pay. The best, but hardly the only, possible way to generate this revenue would be through a wealth tax.
Councilmember Kendra Brooks proposed a wealth tax last year, but the legislation did not find its way out of committee. In short, a wealth tax would apply to passive income; this is income earned from, for example, dividends from stocks and bonds. Those who own these financial instruments (which is surprisingly very few Philadelphians) can best afford to pay a small portion of their gains through income in taxes. The net return could be somewhere in the range of $200 million (or more). The wealth tax, therefore, subsidizes Philadelphia’s poorest children.
Combined with the current $2000 yearly Child Tax Credit, the additional $1200 would provide an extra $266 per month per child living in poverty. This amount of money can go a long way for struggling families-and if one of the benefits is reducing crime and violence, Philadelphia should find ways to make programs like this available to those who need it most.
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