4 takeaways to mark the launch of Youngster Tax Credit score this month

A woman wears a face mask while she walks through the Covid-19 pandemic at Madison’s Niche boutique in Huntington, New York, on Jan.

Alejandra Villa Loarca | News day | Getty Images

Child tax credits are an “underrated incentive” that could boost sales in the retail, restaurant and travel industries – especially as shoppers emerge from the pandemic and prepare for the back-to-school season, according to one Tuesday from Cowen. published research note analysts.

The monthly payments, which begin Thursday, could benefit a wide variety of businesses, from grocers like Walmart to fast food chains like Jack in the Box, according to the announcement.

Families have received child tax credits for years, but the US bailout plan has made several important changes. It increased the amount per child from $ 2,000 to $ 3,000 for those ages 6-17 and to $ 3,600 for each child under 6. They qualified low-income families with little or no taxable income. And it has changed the payout modalities so that families get half of the money through direct deposits, which run from July to December. Families receive the other half after the taxes have been paid.

That means $ 250 or $ 300 per child per month. Families that earn up to $ 150,000 for a couple or $ 112,500 for a single parent family are referred to as heads of household; or $ 75,000 as a single taxpayer receives the full amount. Above this amount, payments will gradually be discontinued – but those who receive less money will also receive advance payments.

According to the Internal Revenue Service, parents and caregivers of nearly 90% of children in the United States receive payments.

Here are four key insights from the analysts:

More dollars mean more spending

The child tax credit will be estimated at $ 150 billion next year, according to Cowen. Analysts at the equity research firm say the additional dollar may surprise both Americans and the economy at large, calling it “an underrated catalyst for discretionary consumer spending.”

When people get the money, they predict families will spend it on home groceries, eating out, and shopping online. They named retailers and restaurants best positioned to attract those dollars. On the food side, they pointed out Walmart, Target, and Grocery Outlet. Among the fast food chains, they named Jack in the Box, Wingstop, Papa John’s, and Darden, based on a survey of consumers looking at their income and habitual residence. And among the e-commerce companies, they proclaimed Amazon.

Simultaneously with “catching up”

Many families have already increased spending on new shoes and clothes when they emerge from their homes after receiving the Covid-19 vaccination. Cowen analysts said child tax credits are likely to flow into this spending spree.

Some retail industry observers have already predicted a typically hot back-to-school season as families long for a fresh start and a sense of more normalcy – and this may lead to fresh notebooks and outfits for the first day of school.

Cowen analysts expect retailers offering back to school or team sports to be well positioned to attract child tax credits, including Walmart, Kohl’s, Foot Locker, Dick’s Sporting Goods, and Nike. They also said that retailers who focus on value, such as B. Off-price dealers like Burlington, Ross, and TJ Maxx, could get a boost as they target low-income families who receive tax credits for children. They also said American Eagle Outfitters was in a good place to attract the payments as it caters to styles that teenagers crave, like loose fitting denim and casual wear.

Spilling over into adult categories

Parents, grandparents, and other caregivers can spend part of the child tax credit on themselves in the form of beer, cigarettes, and plane tickets, according to Cowen.

Analysts estimated the tobacco industry could raise about $ 1.2 billion and alcoholic beverages about $ 2.7 billion of the estimated $ 150 billion impact of the child tax credit. This could mean good news for tobacco company Turning Point Brands and the beer industry players, Constellation Brands and Boston Beer.

It estimates child tax credits will increase air travel by approximately $ 1.15 billion as payments arrive in July for the vacation season. This will be most evident for airlines geared towards vacation travel and lower prices, such as Allegiant, Frontier and Spirit, the analysts predict.

An extension is likely

Monthly payments will end in December – but Cowen analysts are betting that they will be extended. In the note, they said they expect the one-year program to be extended through a law of reconciliation through 2025.

In the note, the analysts explained the enormous scope and scope of the government’s program to combat child poverty. They called it a “major political shift” that functions as a “universal basic income for low-middle-income parents”.

You might also like

Comments are closed.