The annual distribution of the Child Tax Credit has a significant impact on the economy. From July 15th until December 2021, the act provides financial assistance to low-income American families. The Internal Revenue Service (IRS) intends to assist millions of eligible parents.
The massive disbursal of payments is crucial for the administration as its goal is to reduce poverty to half in 2021. The monthly payments get credited to the parent’s bank accounts on the 15th of every month through December. Parents who have not filed the tax returns in 2019 or 2020 are also eligible for tax benefits using the online IRS tool.
The payments depend on the child’s age; the first phase will offer $250 to $300 tax credit for nearly 39 million households. The second pay-out of the tax credit, worth between $3,000 and $3,600 per child depending on their age, would begin next spring.
Although the government aims to reduce poverty, the act also serves as a retail stimulus by encouraging people to buy groceries, school supplies, and clothing. Walmart, Target, and Costco are among the retail sector’s beneficiaries, according to JPMorgan.
The financial support could pump up sales in grocery stores locally which builds the economy. According to the president, the improved child tax credits are part of the American families plan, and he ‘strongly believes that we should extend the new Child Tax Credit for years and years to come.’
Lower and middle-class families can now plan to purchase or pay for needs like clothing, rent, groceries, books and stationery, medication, transportation, and other necessities, ensuring adequate cash circulation and boosting sales. The extra income will lead to spending and not turn into savings as people will be excited to get things they otherwise couldn’t afford.
However, according to a JPMorgan study, this advantage would be minimal concerning the rest of the government’s pay-outs. According to the Joint Committee on Taxation, the child tax credit will provide $110 billion to poor and middle-income families, including the $55 billion in monthly installments.
Chief Growth Officer of Target, Christina Hennington, analyzed the scenario and informed in the first-quarter earnings call that the money propels school shopping for classroom essentials. In a statement, Target said, ‘the child tax credit could serve as near-term tailwinds for our business, and it factors into a positive outlook.’
Additionally, publicly traded companies like Levis, American Eagle, and Simon Property boost sales from household spending.