Four takeaways as the child tax credit kicks off this month

Child Tax Credit payments are an “underestimated stimulus” that could increase sales in the retail, restaurant and travel industries – especially as shoppers emerge from the pandemic and are preparing for back to school, according to a research note released Tuesday by Cowen Analysts.

The monthly payments, which begin Thursday, could benefit a wide range of businesses, from grocery stores including Walmart to fast food chains such as Jack in the Box, according to the note.

Families have won child tax credits for years, but the US bailout has made several key changes. It increased the amount per child from $ 2,000 to $ 3,000 for ages 6 to 17, and to $ 3,600 for each child under 6. It qualified low-income families with little or no taxable income. And it’s changed the way it’s paid out, so families get half of the money through direct deposits that run from July through December. Families will receive the other half after tax declaration.

This will translate to $ 250 or $ 300 per child each month. Families who earn up to $ 150,000 for a couple or $ 112,500 for a single-parent family, called the head of the family; or $ 75,000 as an individual taxpayer will get the full amount. Payments will be phased out above this amount, but even those who receive less money will receive advance payments.

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

Here are four takeaways from analysts:

The child tax credit will amount to about $ 150 billion in stimulus over the next year, according to Cowen. Analysts at the equity research firm say the extra dollars could surprise both Americans and the economy in general, calling them “an underrated catalyst for discretionary consumer spending.”

As families receive the money, Cowen predicts, they will spend it on household food, restaurant meals, and online shopping. Analysts have named the retailers and restaurants best positioned to attract those dollars. On the grocery side, they highlighted 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 consumer survey that looked at their income and the places they frequent. And among the e-commerce companies, they named Amazon.

Many families have already increased their spending on new shoes and clothes as they leave their homes after being vaccinated against Covid-19. Cowen analysts said the child tax credit dollars will likely fuel this spending frenzy.

Already, some retail industry watchers have predicted a generally warm back-to-school season as families crave a fresh start and a sense of normalcy – and potentially funnel that into new notebooks and outfits for the first day of school.

Cowen analysts expect back-to-school or team sports retailers to be in a good position to attract child tax credits, including Walmart, Kohl’s, Foot Locker, Dick’s Sporting Goods and Nike. They also said value-driven retailers, such as low-cost retailers Burlington, Ross and TJ Maxx, could get a boost as they cater to low-income families who receive credit payments. child tax. They also said American Eagle Outfitters is in a good position to attract payments, as it caters to styles teens are looking for, such as looser denim and casual wear.

According to Cowen, parents, grandparents and other caregivers can spend some of the child tax credits on themselves in the form of beer, cigarettes and airline tickets.

Analysts have estimated that the tobacco industry could recover about $ 1.2 billion and alcoholic beverages could recover 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 beer industry players Constellation Brands and Boston Beer.

Cowen estimates that air travel will benefit from an increase of about $ 1.15 billion in child tax credits, as the July payments arrive just in time for the holiday season. This will be especially noticeable for airlines that offer leisure travel and lower prices, such as Allegiant, Frontier and Spirit, analysts predicted.

The monthly payments will end in December, but Cowen analysts are betting they will be renewed. In the note, they said they expected the one-year program to be extended until 2025 through a reconciliation bill.

In the note, analysts cited the size and scope of the government’s program, which aims to tackle child poverty. They called it a “huge policy change” that acts as a “universal basic income for low and middle income parents.”