As Child Tax Credit (CTC) reforms have made abundantly clear, even minor administrative rules can be significantly impactful. A key component of some recent child benefit proposals, including the Family Security Act 2.0, is to place the Social Security Administration (SSA) in charge of implementation. While the IRS has handled the CTC since its inception, the SSA is likely better suited to distribute monthly payments (another legislative priority). However, this administrative shift could imperil recipients unless the child benefit is explicitly disregarded as income.

Unlike tax credits provided by the IRS, benefits delivered by the SSA are generally considered as income when assessing someone’s eligibility for other programs. As discussed by Sam Hammond and Elaine Maag, families could lose access to other essential benefits, like SNAP (formerly known as food stamps) or Supplemental Security Income (disability payments), if a child benefit is treated this way. The loss of eligibility could offset potential material gains provided by the child benefit payments. For some, the impact could be even worse. 

A case example

A closer look at the Supplemental Security Income (SSI) program demonstrates how this is possible. SSI provides cash assistance to low-income, low-asset disabled individuals and the elderly unable to work. Qualifying individuals receive monthly payments but face harsh, outdated program rules. Many are in poverty since the largest possible benefit is below the poverty line and because the benefits are so heavily means-tested. Beneficiaries also cannot exceed a mere $2,000 in assets. These restrictions make it highly problematic to consider the child benefit as income.

Benefits separately intended to support the costs of children and disabilities would be in conflict rather than summative. According to SSI program rules, after $20 of unearned income in a month, every unearned dollar (such as old-age Social Security benefits) reduces one’s benefit by one dollar.  A drop in SSI benefits would cancel out the child benefit dollars.

Others could experience a net loss in income. For example, if the child benefit is sent to a household as an annual lump sum, that could push an SSI recipient’s assets over $2,000 and eliminate their SSI eligibility. This was a concern regarding the expanded CTC in 2021, when SSI recipients with children saw an increase in CTC benefits or got payments for the first time. The SSA had to clarify that the benefits would not count as resources for a year. There are similar concerns with prospective child benefit expansions (broader eligibility for the full credit, larger benefit sizes per child, etc.).

The problem can be easily avoided

One line of bill text would help prevent these problems from arising. The End Child Poverty Act, child allowance legislation sponsored by Congresswoman Tlaib earlier this year, contains the provision necessary to address the issue:

“INCOME DISREGARD.—A child assistance payment made under this section shall not be taken into account as income and shall not be taken into account as resources for purposes of determining the eligibility of such individual or any other individual for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal program or under any State or local program financed in whole or in part with Federal funds.”

Other proposals placing the SSA in charge of a child benefit must contain similar unambiguous language to prevent a harmful benefit domino effect. These administrative details must be plainly laid out. Fortunately, there is a simple legislative solution. The child benefits can be disregarded as income, therefore avoiding serious consequences for some of the most vulnerable Americans.