Economists and financial experts are predicting that retail companies will be the biggest beneficiary from the new child tax credit program. Families have started to receive monthly child tax credits on July 15th as part of the American Rescue Plan.
“Here’s the great news: you won’t have to wait until your next year’s tax return to get that break,” President Biden said in May. “I’m announcing today that on July 15th and on the 15th of every month thereafter throughout the year, you will get deposited in your bank account, half of your tax cut, at least $250 per child each month, a direct deposit into your account. So if you’re a working family with two kids, you’re going to get $500 a month into your bank account on the 15th of every month starting in July.”
Many retail companies are therefore expecting a significant boon to their earnings.
Dollar General Chief Financial Officer John Garratt said on a first-quarter earnings call in late May that the discounter did not include child tax credits in the company’s forecast for the rest of the year. He called it “a wild card,” with an impact that is difficult to measure, particularly as some other government benefits fade away.
Target Chief Growth Officer Christina Hennington said on a first-quarter earnings call that the extra funds could go toward back-to-school sales — a shopping season that retail experts already predict will be stronger than usual as parents and kids seek a fresh start and new clothes, notebooks and laptops for a more typical return to the classroom.
Economists affirmed to CNBC that the payments will be beneficial to retailers.
“It’s a good thing for Walmart and grocery stores,” said University of Notre Dame economics professor Jim Sullivan. “The retail sectors where middle- and lower-income families spend money are likely to benefit some from this.”
“This will fill a void with some of the other payments being no longer distributed,” said UBS retail analyst Michael Lasser. “It’s going to continue to support consumer spending.”
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