Fight club with Nicholas Kristof and John Tamny – The Property Chronicle
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Fight club with Nicholas Kristof and John Tamny

The Macro View

Who’s right about the best way to reduce child poverty?

Reading through the recent intellectual proxy fight between NYT columnist Nicholas Kristof and Fox News panelist John Tamny (Property Chronicle, 22 March), I couldn’t help but recall a discussion I had with an old US-based friend of mine around last year’s presidential election. He commented on how the domestic US media culture had deteriorated over the last couple of years and how hard is had become to find any unbiased information from most mainstream media outlets.

Considering Kristof’s recent op ed piece, “What can Biden’s Plan Do for Poverty? Look to Bangladesh”, which obviously paints a vastly different picture compared with Tamny’s “Contra Nicholas Kristof, Presidential Ink Will Never ‘Scrub’ Away Poverty”, I thought throwing in a few facts and figures might help.

What’s the big thing in Biden’s $1.9tn ARPA plan?

Ambitiously labelled the ‘American Rescue Plan Act 2021’, or ARPA, its section Subtitle G – Promoting Economic Security (Part 2 Child Tax Credit) is nothing less than an(other) American Revolution. For the first time in American history, it introduces child benefits of $3,000 ($3,600 for children below six) per annum for a wide group of recipients.

Apart from the size of the benefit (previously $1,000 in the form of tax credits only) the truly revolutionary element is the amendment to Section 7527A of the Internal Revenue Code referring to Advance payments: “The Secretary shall establish a program for making periodic payments to taxpayers which, in the aggregate during any calendar year, equal the annual advance […] the term ‘annual advance amount’ means […] the amount (if any) which is estimated by the Secretary as being equal to 50 percent of the amount which would be treated as allowed […] for the taxpayer’s taxable year […]”

So, eligible families or single parents get cash as opposed to ‘just’ a tax credit.

The other enlightening element of the revised child tax credit are the relatively high AGI phase-out amounts. Annual reduction thresholds ($50 reduction per $1,000 excess income) are $150,000 (joint filing), $112,500 (head of household status), $75,000 (single filing status).

Looking at the percentage distribution of annual household income in the US in 2019 (disregarding AGI adjustments) demonstrates the magnitude of the programme.

US annual household income distribution, 2019

The Macro View

About Martin Schwarzburg

Martin Schwarzburg

Martin Schwarzburg is arranging finance for emerging market infrastructure, energy and real estate projects as an emerging market banker with Brigg Macadam. He previously served as Global COO Real Estate for the Abu Dhabi Investment Authority (ADIA) .

Articles by Martin Schwarzburg

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