Director of Federal Tax Policy
There’s understandable skepticism that lawmakers will act this year to correct the glaring flaw in the tax code that taxes childless adults into or deeper into poverty. But nearly identical proposals from President Obama and House Speaker Paul Ryan to address that problem, along with provisions in last year’s tax bill, show the gains that are possible. The bipartisan tax bill that policymakers enacted in December included a major anti-poverty achievement in making permanent critical improvements in the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) that would have expired at the end of 2017. The improvements will continue to raise roughly 16 million people, including up to 8 million children, above or closer to the poverty line in 2018 and beyond.
The EITC and CTC encourage and reward work, and growing evidence suggests that income from these tax credits leads to better maternal and infant health, improved school performance, higher college enrollment, and increased work effort and earnings in adulthood (see figure).