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How a Tax Credit for Families with Children Could Do More to Fight Poverty

The Child Tax Credit (CTC) is a powerful tool to stretch the family budget and lift children out of poverty. The CTC boosts working parents’ take-home pay and helps to deliver benefits across a child’s lifespan. But because parents have to earn a certain amount to become eligible for the credit, and because the credit rises gradually with earnings, too many families are excluded from the CTC’s full $2,000 value.

The CTC’s design flaws have not escaped notice. If anything, changes made to the CTC as part of the 2017 tax bill—which extended the credit to families earning as much as $400,000—have prompted renewed concern about how the credit excludes from its full benefit children who need it the most. This has yielded a whole range of potential solutions that play with the CTC’s earnings threshold and refundability. There’s even interest in increasing the credit and untethering it from any earnings requirements, essentially creating a child allowance similar to those implemented in several Western European countries.

The New York Times this week took a long look at the CTC’s past, present and future. From its initiation in 1997 to its recent expansion and inclusion of high-earners in 2017, the CTC has enjoyed bipartisan support. But as conversation about the credit gets louder, it is exciting to see bipartisan enthusiasm for tweaking the CTC to deliver greater benefits for the poorest families. Take Sens. Mitt Romney and Michael Bennet’s proposal, for example.

The Bennet-Romney proposal would expand and reform the CTC to ensure every parent receives $1,500. Another 1,000 would phase in with earnings. These are modest changes—even more modest than the CTC tweaks we propose in our 2019 Ending Child Poverty Now report.

And yet modest changes to the CTC are enough to get us started now in making a difference for young people. Like Josh, a 16-year-old who told a New York Times reporter that he’s accelerating his studies in order to graduate early and become a full-time worker at a grocery store. Why? Because “Food has been a bit of a struggle,” said Josh. His father, a Sam’s Club attendant, receives only a partial CTC credit. It’s not enough to help put food on the table.

Read the full article.

See our Ending Child Poverty Now report.

2019-12-20T14:16:58-05:00December 19th, 2019|