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POLICY INSIGHT
BEYOND THE NUMBERS

Make Child Tax Credit Improvements Permanent in Upcoming Recovery Legislation

| By CBPP

The American Rescue Plan Act, by making a significant set of changes to the Child Tax Credit, will cut the number of children in poverty by more than 40 percent, we estimate. Permanently enacting these historic provisions should be an urgent priority for policymakers in the upcoming recovery bill.

We’ve excerpted below some recent CBPP analyses about the Child Tax Credit improvements:

Congress Should Adopt American Families Plan’s Permanent Expansions of Child Tax Credit and EITC, Make Additional Provisions Permanent

Key tax credit provisions in President Biden’s American Families Plan would provide significant help to all but the highest-income families with children and to low-paid working adults without children. The plan would extend through 2025 the American Rescue Plan Act’s Child Tax Credit expansion and make permanent the Act’s provision making the full credit available to children whose parents have low or no earnings. It would also make permanent the Act’s expansion of the Earned Income Tax Credit for adults not raising children. Congress should adopt these proposed changes, which would result in reductions of child poverty and provide income support for millions of people. And it should go two steps further: it should make all of the Rescue Plan’s Child Tax Credit expansion permanent, as House Ways and Means Chairman Richard Neal recently proposed, and make certain immigrant children who have an Individual Taxpayer Identification Number rather than a Social Security number eligible for the credit.

The Expanded Child Tax Credit Must Be Permanent and Monthly

A Child Tax Credit that the government delivers monthly, rather than as a lump sum after the year has ended, can help families make ends meet by boosting their incomes throughout the year. When families struggle to keep up with monthly expenses, they often have to take on expensive debt to make ends meet; a monthly benefit will help alleviate their need to do so. Struggling families need the [American] Rescue Plan’s Child Tax Credit expansion on a permanent basis, and they need it to be available as a monthly benefit.

Rescue Plan’s Expansions of Earned Income Tax Credit, Child Tax Credit Will Benefit Rural Residents

Rural communities — both nationally and in most states — will benefit disproportionately from the American Rescue Plan’s temporary expansions of the Earned Income Tax Credit and Child Tax Credit. However, the expansions will expire after this year if Congress does not extend them.

Benefits of Expanding Child Tax Credit Outweigh Small Employment Effects

The House-passed COVID-19 relief bill, the American Rescue Plan, would temporarily increase the Child Tax Credit and make the full Child Tax Credit available to all children except those in families with the highest incomes (sometimes called making the credit “fully refundable”). This proposal would markedly reduce the number of children with incomes below the poverty line while narrowing the gap in poverty rates between white children and Black and Latino children. The strong benefits of the proposal far outweigh any potential reduction in employment.