Definitions of welfare vary but usually involve cash and cash-like government benefits provided directly to low-income individuals, whose costs are supported by taxes paid by others. That distinguishes “welfare” from “social insurance” like unemployment benefits, Medicare, and Social Security that individuals earn directly through work and the payroll taxes they and their employers pay. By that standard, the coming surge in “child allowance” payments that will flow disproportionately to low-income parents will make the IRS America’s number one welfare benefit-paying agency.
In their March 2021 $1.9 trillion American Rescue Plan, Democrats converted the former up to $2,000 child tax credit into a “child allowance” worth a flat $3,000 or $3,600 per child in 2021. Those larger payments will start being distributed in monthly allotments this July, including for the first time to parents who don’t work at all. Such monthly payments to even nonworking parents resemble America’s former welfare system. They also contrast sharply with the $2,000 tax credit, which required parents to work to claim any assistance, grew as low-income parents worked more, and was only partly “refundable.” That’s the doublespeak term for payments made by the IRS to individuals who don’t earn enough to owe federal income taxes – which makes it logically challenging to “refund” taxes they never paid in the first place.
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