Director of Federal Tax Policy
The start of a new school year is an appropriate time to highlight important legislation before Congress that would help give all children a chance to reach their potential.
The first few years of life are critical to brain development; growing up in poverty, with its corresponding stress, undermines brain development in young children. But we know that additional income for poor families can mitigate this harm and improve school performance.
Various bills introduced in the Senate and House — including the Working Families Tax Relief Act, sponsored in the Senate by Sherrod Brown, Michael Bennet, Richard Durbin, and Ron Wyden and in the House by Dan Kildee and Dwight Evans — would expand two policy success stories for low- and moderate-income families: the Earned Income Tax Credit (EITC) and the Child Tax Credit. Some 49 million children would benefit under the Working Families Tax Relief Act. So would over 3 million teachers and child care workers, many of whom are paid too little (see table for state-by-state figures).
The legislation would boost the EITC for families with children by roughly 25 percent and make the Child Tax Credit fully refundable so children in lower-income households, including those with little or no income, could benefit fully from it. Today, the Child Tax Credit provides little or no help to millions of children and families with low incomes — the people who need it most.
The bill would also create a larger, fully refundable Young Child Tax Credit for children under age 6, boosting the credit to $3,000 per young child, up from today’s $2,000.
Consider, for example, a single mother with a ten-month-old daughter and 3-year-old son who works part-time in a fast-food restaurant earning $10 an hour, or $15,000 a year. The bill would boost her income by $5,580 at a crucial stage in her children’s lives.
Taking its EITC and Child Tax Credit expansions together, we estimate that the bill would boost the incomes of roughly 25 million families with children, including 13 million white families, 5 million Latino families, 4 million Black families, and 1 million Asian American families. It would lift 3 million children out of poverty and lessen poverty for 8 million other children. The child poverty rate would drop by more than a quarter, from 15 percent to 11 percent, using the Supplemental Poverty Measure (which most analysts view as more accurate than the official poverty measure and which counts refundable tax credits as income). And deep poverty among children — the share living below half of the poverty line — would fall by 40 percent.
A National Academy of Sciences (NAS) committee that Congress charged with recommending ways to reduce child poverty recently included similar proposals — an EITC expansion and “child allowance” (which could take the form of a refundable Child Tax Credit) — in one of its policy packages. “[T]he weight of the causal evidence,” the committee concluded, “indicates that income poverty itself causes negative child outcomes, especially when it begins in early childhood and/or persists throughout a large share of a child’s life. Many programs that alleviate poverty … have been shown to improve child well-being.” The better outcomes linked with stronger income assistance include healthier birth weights, lower maternal stress, better childhood nutrition, higher school enrollment, higher reading and math test scores, higher high school graduation rates, less drug and alcohol use, more positive behavior, and higher rates of college entry, the NAS committee noted.
The Working Families Tax Relief Act would also boost the incomes of many child-care providers, teaching aides, and teachers. For example, consider a seventh-grade science teacher making $45,000 whose spouse cares full time for their two children, ages 2 and 7. Their EITC would rise by about $1,460 and they would receive an additional $1,000 from the Young Child Tax Credit, for a total gain of about $2,460.
Or consider a young child-care provider who works 30 hours a week for $11 an hour, earning about $17,200. The bill would substantially expand the tiny EITC for working people not raising children in their homes, raising her income by $1,180.
|Children, and Teachers and Child Care Workers, Who Would Benefit From Working Families Tax Relief Act, by State|
|State||Number of Children||Number of Teachers and Child Care Workers|
|Dist. of Columbia||81,000||6,000|
Source: CBPP estimates based on 2015-2017 American Community Survey data and March 2018 Current Population Survey data.