Personal finance

With the support of the child tax credit, some parents launched businesses last year

Russell Toll and his wife, Heidi, when he returned from service in Iraq in 2009.
Russell Toll

When the child tax credit checks started to be delivered in July of last year, Russell Toll saw it as an investment in his family.

With the help of the credit, the Dallas-area resident was able to speed the launch of Compassion Neuroscience, a nonprofit that will make transcranial magnetic stimulation therapy more accessible to those in need.

“It just accelerated the process dramatically,” said Toll, 40, an assistant professor of psychiatry at the University of Texas Southwestern Medical Center at Dallas and a veteran who served in Iraq.

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It helped keep the family afloat when his wife, Heidi, 37, was laid off from her nursing job at Disneyland and taking substitute jobs. The family used part of the credit to put the youngest of their three children in preschool. Then Toll was able to hire a lawyer to set up the nonprofit.

“If you need to drive a tank, I got you, but I did not go to business school,” Toll said.

The nonprofit is set to see its first patients in the spring. It also has the goal of one day providing free treatment to Gold Star families — the immediate family of armed forces members killed in action.

Russell and Heidi Toll’s children. Ben, left, is now 7, Abby, center is now 5 and Nick, right, is now 9.
Russell Toll

“There is such a devastating need, and I’m excited to get out there and start making a difference,” Toll said.

How the credit helped

For the last six months of 2021, enhanced child tax credit payments were sent to millions of American households with eligible children. Families getting the full benefit received $250 per month for children age 6 to 17 and $300 for children under 6.

The benefit supported work and entrepreneurship among parents instead of discouraging it, a study of Census Bureau data by the Social Policy Institute at Washington University in St. Louis found. While families were getting the monthly checks, there were slight increases in parent self-employment and work in the nonprofit sector, the analysis showed.

The self-employment rate increased the most — nearly 3% — in families with incomes of less than $50,000, and was most prominent in Black, Hispanic and Asian families that made less than $50,000. This likely contributed to record business creation in 2021.

The researchers found that many parents were able to work more by using the child tax credit payments for child care, as well as other essentials such as food and rent. Having the child tax credit also gave parents an extra cushion to be more flexible with their employment.

“One of the biggest benefits of the [child tax credit] is that it gives parents budgetary slack that allows them to pursue better outcomes and better options for their families,” said Stephen Roll, a research assistant professor at the Social Policy Institute.  

In addition, the researchers argue that the lack of work requirements — a sticking point in negotiations about expanding the credit — helped parents find better jobs.

“Without those work requirements, people had the flexibility to find the employment situation that worked best for them and their family in the long term without feeling pressure to take whatever comes along first,” said Leah Hamilton, an associate professor of social work at Appalachian State University in Boone, North Carolina, and a co-author of the study.

A safety net

To be sure, the study doesn’t suggest that parents always used the money directly from the child tax credit to launch new businesses. Instead, having the benefit delivered monthly helped give families with children the security they needed to start their own projects.

“It was knowing that their children would be taken care of even if they failed,” Roll said.

For Johnny Walls, 50, the $250 check he got each month for his 8-year-old son, Hunter, meant that the lot rent for their mobile home outside Charleston, West Virginia, was covered while he launched his freelance website and graphic design business.

“We still had a roof over our heads, so that freed me up to be able to start that business and get going on it,” Walls said.

Johnny Walls and his son, Hunter.

During the pandemic, Walls became a single father and struggled to balance working and caring for Hunter, especially when school was closed, he said.

“I had to figure out a way to just stay home,” said Walls, who previously did IT work outside of the home. The money also helped him clear his head of some of the stress of paying for rent, utilities and food each month, which meant he had more time and energy to devote to the business.

“Knowing that I was going to be here, and we had a place to live, that was huge for me to be creative enough to do my business,” Walls said.

What’s next

The enhanced child tax credit lapsed at the end of 2021, and it is unclear if it will be continued. Democrats had included a one-year extension of the benefit in their Build Back Better agenda, but the legislation has stalled in the Senate.

There are also some bipartisan proposals that would separately revive the credit, but none currently have momentum.

That means for now families cannot count on receiving the credit and must grapple with record-breaking inflation on their own.

For those who launched businesses, it has slowed some progress. In Dallas, Toll was on track to purchase his own transcranial magnetic stimulation machine with the help of the credit, which would have helped Compassion Neuroscience see more patients. Now, however, the family budget is tighter, and so saving for the equipment has been put on hold.

Things are tighter without the credit for the Walls family, as well. Though he is still working on his business from home, Walls has noticed his budget is stretched thinner due to inflation and loss of the tax benefit.

Even simple things like snacks for Hunter cost more, and the family is more conscious of turning off lights, not setting the thermostat too high and making sure not to miss the school bus to save on gas.

“I’m looking forward to the time period where I don’t have to run air conditioning or heat,” said Walls, adding that the extra money could go to getting Hunter new school clothes.

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