If you are a US citizen, and you have children, and you file your taxes electronically, you may find some free money in your bank account today. If you don’t file electronically, and you have children, you may get a check mailed to you in the coming days from the IRS.
Yay??
Well, free money is always good, but as usual, and to with all due respect to Hugh Nibley, there really is no free lunch.
But first, the details:
This is a result of some of the federal stimulus plans that were approved earlier this year. There will be monthly checks disbursed on the 15th every month in 2021. Ninety percent of kids and their families will benefit from the newly expanded CTC credit. Middle-class families and families working to join the middle class are all eligible to receive the full credit of $3,600 per child under age 6, and up to $3,000 per child ages 6 through 17. Families will receive up to $250 a month for each child, and $300 a month for every child under 6.
To be clear, I am against all taxes in principle. Poverty should be handled by churches and other charitable institutions, and taxes should be eliminated until we get as close to zero taxes as possible. But of course this is a chimera in our days of ever-expanding government, where citizens increasingly look to bureaucrats and politicians for “free” checks.
If we are going to be forced to pay taxes, I am in favor of child tax credits. A permanent expansion of tax credits aimed at children encourages more children, which is overwhelmingly a good thing.
It should be clear, however, that there is no such thing as free money from the government. The yearly deficits are in the trillions now, which means the Federal Reserve has to create the money from thin air to pay the deficits. New money creation is the literal definition of inflation. (ie, “inflating the money supply”). The increasing deficits are the primary reason prices are going through the roof in the United States.
So, you might get a few hundred dollars a month (maybe more for many latter-day Saint families, which is awesome) for the rest of the year, but that money will be eaten up by higher prices over time.
If you are a young family without your own home, this means housing prices will continue to get higher and higher, making a purchase increasingly unattainable. This means gas prices will continue to go up, and food prices, and new and used car prices, etc.
So, the real solution is a balanced budget, lower taxes, less government and more self-reliance. The real solution would be that if you make $70k a year you get to keep $70k a year (minus voluntary tithing of course to help the truly needy). But we are so far from that possibility that it is difficult to even imagine what that world would look like.
So, enjoy your “free money.” While you can.
Well said Geoff!
The first thing I learned on the first day of my senior year of high school, in Mr. Tahaney’s economics class was TINSTAAFL – there is no such thing as a free lunch. 30 years later it rings even more true. I just wonder what the actual price will be for all of the free stuff and when will that bill be coming due?
Joyce, it is difficult to see any way out. I see three possibilities: 1)continuing deficits and money printing for years to come, with housing prices and car prices doubling every 10 to 12 years, 6 to 10 percent real inflation, and, yes, the stock market going up, but with everybody worried that eventually the bubble will pop 2)people and companies stop buying US treasuries, which forces interest rates to go up, and when interest rates go up we fall into a massive recession 3)the Fed gets the political cover to raise interest rates on its own, which also causes a massive recession, but in the long run increases the health of the US economy. You can see why the money printing continues: nobody wants to take the political risk of raising interest rates, which is what the Fed did in the early 1980s (and which led to the prosperity of the 1980s and 1990s). The problem is nobody wants the hard medicine for a year or so while the economy adjusts to real interest rates.
Geoff,
I agree. Sadly, there’s no recourse for endless spending from either party. Biden wants $6 trillion for n deficit spending, while Republicans”only” want to spend half.
This is one reason costs are rising. The dollar is devalued, causing inflation.
Time to vote Libertarian.
Feels strange to click Like when I dislike the situation completely, but absolutely love your article. The facts become a little more depressing each year. Come quickly, Lord Jesus.
I’ve heard a number of people get excited about the new momthly child tax credit, but very few people seem to realize that this is instead of the child credit on annual tax returns. So if for 2020 someone had their tax withholding set low, they may end with taxes due for 2021.
I can see the logic in doing the payments monthly though as I’ve seen too many low income clients take their tax returns and spend it in one go on toys. It may still be a problem for some families come tax time.
ReTx, you are correct, of course, but I want to point out for readers that the child tax credit involved has temporarily increased from $2k per child to $3k and $3.6k (depending on the child’s age). So some families will owe taxes, and others will not.