BEYOND THE NUMBERS
The Republican tax framework raises the Child Tax Credit (CTC) but the increase is non-refundable, meaning only families with high enough incomes to owe federal income taxes would benefit — leaving out millions of low-income working families with children. Justifying the proposal, White House National Economic Council Director Gary Cohn wrongly suggested that boosting low-income working households’ CTC would discourage work:
[The existing credit] is refundable today and will stay refundable. The additional money that we put into the credit will be non-refundable. We want to encourage people to work. We want to have people have taxable income to take the credit against.
That’s a faulty excuse for excluding the poorest children in working families.
- The policy would lock out millions of working families with children. Only working families can get the CTC, including the part that’s refundable. A working married couple with two children making $24,000 or less, or single parents making less than $18,000 and raising two kids, wouldn’t benefit at all from any CTC increase unless it were refundable. Such families may be working hard at low-wage jobs, with as many hours as they can find, but they still wouldn’t get any CTC boost.
- Improving the CTC for low-wage working families would be pro-work for many. For low-wage workers, and working-class parents generally, the CTC and its sibling, the Earned Income Tax Credit, have similar designs and have been studied rigorously for decades. They phase in, rise as earnings rise, plateau at their peak, and then phase out. These tax credits affect work primarily by drawing people into the workforce, the research concludes. If policymakers raised the CTC for low-wage workers by raising the phase-in rate and starting the phase-in at the first dollar of earnings (rather than starting at $3,000 in earnings, as it now does), that would boost the support it provides for workers to join the labor force at low wages, even if they can’t find a full-time job.
- CTC increases for low-income families are even more pro-work when accounting for their long-term impacts on children. The case for extending a CTC increase to the lowest-income families is even stronger when one accounts for the credit’s positive impact on wages and lifetime effects on low-income children. The CTC’s income boost provides important benefits for children — including improved health as infants and children and better school performance — as well as higher expected earnings as adults, research indicates. These positive effects are clearest for the poorest children.
- El crédito tributario por hijos
- Federal Payroll Taxes
- Federal Tax Expenditures
- Fiscal Stimulus
- Marginal and Average Tax Rates
- Tax Exemptions, Deductions, and Credits
- The Child Tax Credit
- The Earned Income Tax Credit
- The Federal Estate Tax
- Where Do Federal Tax Revenues Come From?
- Where Do Our Federal Tax Dollars Go?