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Senate Tax Bill’s Child Tax Credit Increase Provides Only Token Help to Millions of Children in Low-Income Working Families

November 17, 2017

The recently revised Senate Republican tax bill would increase the maximum Child Tax Credit (CTC) from the current $1,000 to $2,000 per child – up from $1,650 in the prior version — but low-income working families would largely miss out on the increase, just as in the earlier version. Indeed, in revising the proposal, Senate Finance Committee Chair Orrin Hatch increased the cost of the proposal by about $13 billion per year, but did nothing for the millions of low- and moderate-income working families that would get only token help under the prior proposal.

10 million children whose parents work for low pay live in families that would receive a token benefit of $75 or less.Republicans have highlighted the CTC expansion as their plan’s signature benefit for working families.  But 10 million children whose parents work for low pay — about 1 in 7 of all U.S. children in working families — live in families that would receive a token benefit of $75 or less from the proposal.  Another 16 million children in working families would receive more than $75 but less than the full $1,000-per-child increase in the credit (in most cases, much less).  Altogether, well more than 1 in 3 children in low- and moderate-income working families would receive less than the full proposed CTC increase.

Under the Senate Republicans’ proposal, more than 30 percent of children in working families in almost every state would receive less than the full increase.  In 15 states, at least 45 percent of these children would get less than the full increase: Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas.

Senate Republicans’ decision to provide a token or partial increase to these 26 million children is especially striking because they also chose to newly extend the CTC (in whole or in part) to families with higher incomes. Married couples with two children with incomes between $115,000 and $500,000 (and single parent families with incomes between $75,000 and $500,000) would become newly eligible for the full credit.

When House Republicans introduced their similar CTC proposal, some Senate Republicans rightly criticized it for leaving out millions of children in low-income working families. Yet the Senate proposal takes almost the same approach, offering those same families just $75 of help, while proposing to increase the CTC for high-income families even more than the House bill.

The Senate bill would also cut or eliminate the CTC for about 1 million children in low-income immigrant families, nearly all of them Dreamers, creating further economic hardship for this group of families.  (See text box.)

And even as the Senate CTC proposal provides token or partial benefits to millions of low- and moderate-income children, it provides large new tax cuts for the wealthiest families and profitable corporations while increasing deficits by $1.5 trillion over the next decade and undermining health coverage for millions of Americans.  Congressional Republicans are likely to use rising deficits as an excuse to come back as soon as next year and seek large budget cuts in areas such as Medicaid, food assistance for struggling families, and education.  These cuts will be borne heavily by the same families that receive no or only modest benefits from the tax bill, leaving them worse off when the tax cuts and subsequent budget cuts are considered together.

The CTC Proposal in the Senate Tax Bill

The CTC now provides a maximum tax credit of $1,000 per eligible child under age 17. The credit is “partially refundable,” meaning that it is partly, but not entirely, available to families with incomes below a certain level. Specifically, the refundable portion of the CTC is limited to 15 percent of a family’s earnings over $3,000.  Thus, a single mother with two children and earnings of $10,000 is eligible for a CTC of $1,050, or $525 per child, rather than for the $2,000 ($1,000 per child) that a middle-income family with two children receives. Because of the credit’s slow phase-in for working families with low incomes, families with two children do not receive the full credit of $1,000 per child until their earnings reach $16,333.  The poorest children consequently qualify for only a very small CTC or none at all. 

The revised Senate tax plan proposes to increase the maximum CTC to $2,000 per child and make the credit newly available to children under 18, allowing 17-year-olds to qualify.  But it only slightly increases the refundability of the existing credit, which would be limited to 15 percent of earnings over $2,500.  Moreover, as explained below, the Senate bill limits low-income families’ access to its CTC increase, capping the amount of the credit that is refundable at $1,000, adjusted only for inflation going forward (and rounded to $1,100 in 2018).  The maximum refundable amount would not reach $2,000 for three decades.  Like nearly all of the individual-level tax provisions in the Senate bill, the CTC expansion would expire after 2025, while the various corporate tax cuts would remain in effect permanently.

While doing virtually nothing to strengthen the CTC for the lowest-income working families, the plan calls for increasing the income levels at which the CTC begins to phase out for higher-income families, thereby making more families with six-figure incomes eligible for the credit. 

Millions of Low-Income Working Families Would Be Left Out

To see how the Senate bill’s CTC expansion would affect children in low- and moderate-income working families, consider two examples.

  • A single mother with two children working full time as a home health aide at the federal minimum wage earns $14,500.  Based on her earnings, her total refundable credit is capped at $1,725, less than the current-law $1,000-per-child credit. Under the Senate bill, her refundable credit would be $1,800, a token increase of just $75.
  • A married couple with two children earns $24,000.  Based on their earnings, this couple could qualify for a total refundable credit of $3,225, so it would seem they could receive a significant benefit, though less than the $1,000-per-child increase.  But because the bill would cap refundability at $1,100 per child in 2018, the family would benefit by only $100 per child ($200 total) next year. 

We estimate that 10 million children under 17 in low-income working families (about 1 in 7 of all U.S. children in working families) are in families that would receive $75 or less from the CTC increase, with situations similar to the first example above.[1]  Another 16 million children in low-income working families would benefit by more than $75 but less than the full $1,000-per-child increase in the credit; 60 percent of these children are in families that would benefit by less than $400 per child in 2018.[2]  In total, 26 million children under 17 in working families — well more than 1 in 3 children in working families — would receive a token or partial CTC increase.  This includes:

  • 7.5 million children in working-poor families, 1.6 million of whom live in deep poverty (i.e., below half the poverty line);
  • 9.7 million children under age 6;
  • 9.7 million Latino children, 9.5 million white children, 5.0 million African American children, and 700,000 Asian children; and
  • 4.2. million children who live in rural counties, and 22.2 million children in metropolitan ones.[3]

(See Table 1. For detailed methodology and state-by-state estimates of children who would receive token or partial benefit, see the appendix.)

 

TABLE 1
Children Under Age 17 in Working Families Left Out of Full CTC Increase in Revised Senate Tax Bill Due to Low Income, in Millions
  Receive only token increase ($75 or less) Receive more than $75 but less than full increase Total receiving less than full increase
Latino 3.7 6.0 9.7
White (non-Latino) 3.3 6.2 9.5
African American (non-Latino) 2.3 2.7 5.0
Asian (non-Latino) 0.2 0.5 0.7
Other 0.7 0.8 1.5
Total 10.3 16.2 26.4
Including
Under age 6 3.9 5.8 9.7
In poverty 3.8 2.5 6.3
In deep poverty (below half the poverty line) 1.1 0.2 1.2
Living in rural counties 1.6 2.6 4.2
Living in metropolitan counties 8.6 13.6 22.2

Note: “Rural counties” refers to children who live outside of metropolitan statistical areas, as defined by the Office of Management and Budget. Each county is defined as either in a metropolitan area or as a non-metropolitan (rural) county.

Source: CBPP estimates from March 2017 Current Population Survey, 2013-2015 American Community Survey data, and Tax Policy Center table T17-0228.  For more details, see the Technical Appendix.

 

The average income of working families with children that would be left out of the full CTC increase is about $25,000.  Among these working families, 7 in 10 include at least one parent who works full time for most of the year.[4]  The parents in families receiving less than the full credit work in a range of occupations, many of which pay low or modest wages (see Table 2).

 

TABLE 2
Top Occupations of Working Parents Left Out of Full CTC Increase in Revised Senate Tax Bill Due to Low Income
  Number of working parents
Office and administrative support  1,540,000  
Sales 1,467,000  
Food preparation and serving 1,260,000  
Building and grounds cleaning and maintenance 1,217,000  
Construction and extraction  1,199,000  
Transportation and material moving  1,156,000  
Manufacturing 1,129,000  
Personal care and service  993,000  
Health care support  733,000  

Note: “Manufacturing” refers to “Production” occupations. Figures reflect working parents of children under 17.

Source: CBPP estimates from March 2017 Current Population Survey and Tax Policy Center table T17-0228.  For more details, see the Technical Appendix.

 

As noted, the bill would extend CTC eligibility to children who are 17 years old.  More than 1 million 17-year-olds made eligible would get less than the full credit, while about 2.7 million 17-year-olds would qualify for the full credit.

Large Share of Children in Every State Would Receive Token or Partial Benefit

In almost every state, at least 1 in 10 children in working families would receive only token help from the Senate bill’s CTC increase (see Appendix Table 1).  And in almost every state, at least 30 percent of children in working families would receive less than the full increase.

But in many states, generally higher-poverty, lower-wage states, a much larger share of children would be left out.  In 15 states, at least 45 percent of children in working families would receive less than the Senate bill’s $1,000-per-child CTC increase: Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas.

Appendix Table 2 shows the number and share of children in working families in each state receiving only a token ($75 or less) increase (due to low income) who live in metropolitan and rural counties. Nationally, 1.6 million children receiving a token increase live in rural counties while 8.6 million live in metropolitan counties. Appendix Table 3 shows the number of children in working families in each state who live in rural and metropolitan counties and receive less than the full $1,000-per-child CTC increase.  Nationally, 47 percent of children in working families in rural counties do not get the full benefit, while 40 percent of children in metropolitan counties do not. 

Children Left Out Are Those Who Would Benefit the Most

The children who would receive a token or partial increase from the proposed CTC changes are those whose families experience the greatest financial hardship, and those for whom additional help would likely make the most difference in helping make ends meet and creating a more stable environment for children.  They are also those for whom, extensive research indicates, a CTC boost could make the most difference over the long run.

  • Research indicates that income from the Earned Income Tax Credit (EITC)[5] and the CTC yields benefits for many children at virtually every stage of life.[6]  Starting from infancy — when larger refundable tax credits have been linked with more prenatal care, less maternal stress, and signs of better infant health — children who benefit from tax-credit expansions have been found to do better than similar children who don’t benefit.  They have higher odds of finishing high school and therefore going on to college, and the added income from the credits has been linked to significant increases in college attendance by making college more affordable for families with high-school seniors. Researchers note that the education and skill gains associated with the EITC and CTC are likely to keep paying off through higher earnings and employment in adulthood.
  • Research also shows that income gains from sources that include tax credits matter the most for the poorest children. “[T]here is very strong evidence that increases in income have a bigger impact on outcomes for those at the lower end of the income distribution,” a systematic review of the research literature on the effects of income during childhood, conducted by researchers at the London School of Economics and Political Science, concluded. All 13 of the relevant studies the researchers examined supported this finding[7] One study found, for example, that the EITC’s effect in increasing children’s math and reading test scores was almost three times larger for the lowest quartile of its sample than for other low- and moderate-income families.[8] These findings are consistent with the view of many experts that the adverse effects of poverty on children are most pronounced for children who live below half of the poverty line[9]

Many Families With Six-Figure Incomes Would Be Made Newly Eligible for the Credit or Receive the Largest CTC Increases

While the lowest-income working families would get only a token increase from the CTC proposal in the Senate tax bill, those who earn substantial salaries would qualify for the maximum CTC boost (see Figure 1).  Of particular note, the proposal would increase the income level at which the CTC begins to phase out, making more filers with six-figure incomes eligible for the credit. 

  • Married couples with two children and incomes between $150,000 and $580,000 would become newly eligible for a CTC.  (Currently, the CTC phases out at $150,000 for married filers with two children.)
  • Married couples with two children and incomes between $115,000 and $500,000 (and single parents with incomes between $75,000 and $500,000) would become newly eligible for the maximum CTC.  A married couple with two children with income of $500,000 would receive a $4,000 CTC increase; its CTC would rise from zero today to $4,000 under the plan.
Figure 1
Low-Income Working Families Get Little From Senate Tax Bill's Child Tax Credit Increase

 

Senate Bill Fails to Fix Fundamental Problems in House CTC Proposal

When House Republicans introduced their CTC proposal, some Senate Republicans rightly criticized it for excluding children in low-income working families.[10] Yet the Senate proposal takes almost the same approach, at least with regard to low- and moderate-income children. Where the House bill leaves out 10 million children in low-income working families, the Senate bill offers those same families a token benefit of at most $75. And in both bills, millions of additional families would receive more than $75 but less than the full CTC increase.[11]

At the same time, the Senate bill goes even further than the House bill in extending the CTC to high-income families. Where the House proposal would make married couples with two children with incomes between $150,000 and $294,000 newly eligible for the credit, the Senate extends eligibility to couples with incomes up to $580,000.

Rubio-Lee Proposal Would Help But Still Fall Short

Republican Senators Marco Rubio and Mike Lee criticized the original Senate CTC proposal for doing too little to help low-income working families — and this new proposal continues to provide only token help to 10 million children.[12] And, in recent days, Senator Rubio has reiterated that the CTC should be strengthened for low-income families.[13]

A proposal from Senators Rubio and Lee, also endorsed by a number of other Republican senators, would more significantly increase the amount of the CTC that would be refundable, in addition to increasing the credit to $2,000 per child.[14]  The proposal thus would provide a more meaningful CTC boost — about $500 — to the poorest working families.  Even so, those families still would receive only a fraction of the proposed increase in the maximum per-child credit and much smaller increases than those families higher up the income scale.

The Rubio-Lee proposal would change the refundable amount of the CTC to 15.3 percent of a family’s total earnings — that is, it would start phasing in with the first dollar of earnings — instead of the credit equaling 15 percent of earnings over $3,000, as at present.  The impact of these changes would be positive but modest.  For example, if the Rubio-Lee refundability proposal were added to the House Republican bill, a single parent with two children working full time at the federal minimum wage, earning $14,500 annually, would receive a CTC increase of $494, rather than zero as under the House bill.  But this would be only a quarter of the $2,000 CTC increase that two-child families at higher income levels would receive under the Rubio-Lee CTC design.

CTC reforms could be designed to more significantly strengthen the credit for lower-income families.  The current CTC could be made fully refundable so families with very low or no earnings could receive the full CTC.  A more modest improvement would begin phasing in the credit with the first dollar of earnings, as the Rubio-Lee proposal would do, and raise the phase-in rate significantly above 15 percent, at least for families with a young child, so that working-poor families would receive a more adequate CTC.  The amount of the maximum CTC could also be increased further, especially for young children.  Children under 6 tend to be poorer than other children, and the research literature is particularly clear that young children would benefit significantly from the additional income that such CTC improvements could provide. These and other CTC improvements are included in bills introduced by Rep. Rosa DeLauro, Senators Sherrod Brown and Michael Bennet, and other lawmakers.[15]

CTC Changes Can’t Overcome Senate Bill’s Larger Problems

Improvements like these would substantially improve the CTC proposal in the Senate tax bill.  But they would not alter the two overriding shortcomings in the overall plan — its heavy tilt toward the highest-income households and profitable corporations, and its impact in substantially increasing budget deficits and debt.  Rising deficits in turn would lead to increased pressure to make deep budget cuts in areas such as health care, food assistance for struggling families, and education — cuts that would fall heavily on low- and middle-income families and render them net losers, even if the plan’s CTC provisions are strengthened.

Overall, the Senate tax bill is heavily skewed toward high-income households and profitable corporations. In 2021 (before individual tax cuts sunset), filers with annual incomes over $1 million would see tax cuts averaging roughly $57,000, compared to modest tax cuts and tax increases overall for households with earnings of less than $50,000.[16] Even a substantially improved CTC would only modestly mitigate this extreme tilt.

Congressional leaders and the Trump Administration have made clear their plans to seek large budget cuts after the tax bill is completed.  Congressional leaders have pointed to existing budget deficits — even before any new tax cuts are enacted — to justify proposed steep cuts in basic assistance programs on which struggling families rely to obtain health care and help make ends meet, as well as cuts in a broad set of programs important to children’s future prospects, such as education and job training.  If such cuts were made to offset the cost of the tax cuts, most families with children would likely end up worse, rather than better, off. [17]

Tax Bill’s Child Tax Credit Change Would Hurt 1 Million Children

In addition to largely excluding millions of children from its CTC increase, the Senate tax bill would harm 1 million low-income children in working families by denying them the Child Tax Credit (CTC) because they lack a Social Security Number (SSN).

People who work in the United States must pay taxes on their income, regardless of their immigration status.  Immigrant workers lacking an SSN file their income tax return using an ITIN.  ITIN filers are generally subject to the same tax rules as other filers and are eligible for the same tax benefits, such as the CTC (including the “refundable” part that goes to those who earn too little to owe federal income tax). The Senate bill, however, would allow filers to claim the refundable CTC only for children who have an SSN rather than an ITIN.

Proponents describe this CTC change as an “anti-abuse” measure.  It isn’t: it’s a major eligibility cut for working families who are doing nothing wrong by claiming the credit.  Roughly 1 million children, most of them in low-income working families, would lose eligibility for the CTC, based on data from the Pew Hispanic Center. These children are overwhelmingly Dreamers — undocumented children who were brought to the United States by their immigrant parents. Their parents use the credit to help feed their families and keep a roof over their heads, and it goes only to working families, including many in which the parents work in tough jobs that often lack basic protections that most other workers take for granted. Many of these individuals pick crops, clean houses and offices, or care for other Americans’ children or grandparents.

The children who would lose the tax credit will continue to be part of our communities and the economy as adults. All Americans thus have a stake in ensuring that these children get the resources they need to become productive workers. Taking the CTC’s income away from poor children would not only increase poverty and hardship immediately, but would also affect school performance and make it less likely that these children will finish high school and go on to college, recent research indicates.a The CTC changes thus could increase poverty both today and in the future.

The IRS is already acting to prevent error and fraud concerning ITINs and the CTC, and Congress took action as well.  But the CTC provision in the House bill isn’t designed to strengthen tax compliance. It’s an attempt to deny the credit to 1 million children in immigrant families.

a Arloc Sherman and Tazra Mitchell, “Economic Security Programs Help Low-Income Children Succeed Over Long Term, Many Studies Find,” Center on Budget and Policy Priorities, July 17, 2017, https://www.cbpp.org/research/poverty-and-inequality/economic-security-programs-help-low-income-children-succeed-over.

APPENDIX TABLE 1
Children Under 17 in Working Families Left Out of Full Child Tax Credit Increase in Senate Tax Bill Due to Low Income, by State
  Receive only token increase ($75 or less) Receive more than $75 but less than full increase Total receiving less than full increase
  Number Percent Number Percent Number Percent
US Total 10.3 million 16 16.2 million 25 26.4 million 41
Alabama 181,000 19 249,000 27 430,000 46
Alaska 22,000 13 32,000 19 54,000 32
Arizona 264,000 19 399,000 29 663,000 48
Arkansas 119,000 20 185,000 31 305,000 51
California 1,336,000 17 2,162,000 27 3,498,000 44
Colorado 134,000 12 267,000 24 400,000 36
Connecticut 67,000 10 119,000 18 186,000 27
Delaware 29,000 16 39,000 22 68,000 38
Dist. of Columbia 14,000 16 21,000 23 35,000 39
Florida 586,000 17 1,039,000 30 1,625,000 47
Georgia 422,000 20 576,000 27 998,000 46
Hawaii 31,000 11 65,000 23 96,000 35
Idaho 56,000 15 123,000 32 179,000 46
Illinois 388,000 15 621,000 24 1,008,000 38
Indiana 230,000 17 361,000 26 591,000 43
Iowa 86,000 13 147,000 23 233,000 36
Kansas 90,000 14 166,000 26 256,000 40
Kentucky 150,000 18 217,000 26 367,000 43
Louisiana 194,000 21 241,000 26 435,000 46
Maine 29,000 13 55,000 25 85,000 38
Maryland 129,000 11 231,000 19 360,000 30
Massachusetts 121,000 10 196,000 16 317,000 26
Michigan 325,000 17 452,000 24 777,000 41
Minnesota 134,000 12 229,000 20 364,000 31
Mississippi 133,000 22 178,000 30 311,000 52
Missouri 198,000 16 299,000 25 497,000 41
Montana 31,000 16 47,000 24 79,000 40
Nebraska 61,000 14 104,000 24 164,000 39
Nevada 98,000 17 181,000 31 279,000 48
New Hampshire 20,000 8 42,000 17 62,000 26
New Jersey 209,000 12 330,000 19 538,000 30
New Mexico 91,000 21 131,000 31 222,000 53
New York 569,000 16 842,000 23 1,411,000 39
North Carolina 355,000 18 557,000 28 911,000 46
North Dakota 17,000 11 27,000 18 44,000 29
Ohio 389,000 17 542,000 24 931,000 41
Oklahoma 142,000 17 246,000 30 388,000 47
Oregon 125,000 17 195,000 26 320,000 42
Pennsylvania 313,000 14 517,000 22 830,000 36
Rhode Island 24,000 13 42,000 23 65,000 36
South Carolina 176,000 19 252,000 27 428,000 47
South Dakota 24,000 13 46,000 24 70,000 37
Tennessee 248,000 19 346,000 27 594,000 47
Texas 1,184,000 19 1,759,000 28 2,943,000 47
Utah 99,000 12 217,000 26 317,000 38
Vermont 12,000 12 21,000 20 34,000 32
Virginia 194,000 12 339,000 21 534,000 32
Washington 179,000 13 332,000 24 510,000 36
West Virginia 57,000 18 81,000 26 138,000 44
Wisconsin 158,000 14 260,000 22 418,000 36
Wyoming 13,000 11 27,000 21 40,000 32

Source: CBPP estimates based on 2013-2015 American Community Survey data, March 2017 Current Population Survey data, and Tax Policy Center table T17-0228. For more details, see the Technical Appendix.

 

APPENDIX TABLE 2
Children Under 17 in Working Families Receiving Only a Token Child Tax Credit Increase ($75 Or Less) Under Senate Tax Bill, by Metropolitan and Rural Counties
  Living in Metropolitan Counties Living in Rural Counties
  Number Percent Number Percent
US Total 8.6 million 16 1.6 million 18
Alabama 134,000 19 47,000 22
Alaska 11,000 10 11,000 20
Arizona 243,000 18 21,000 29
Arkansas 66,000 17 54,000 25
California 1,314,000 17 22,000 16
Colorado 113,000 11 20,000 16
Connecticut 65,000 10 (b)  (b) 
Delaware 29,000 16 (a)  (a) 
Dist. of Columbia 14,000 16 (a)  (a) 
Florida 559,000 17 27,000 23
Georgia 340,000 19 81,000 24
Hawaii 24,000 11 7,000 15
Idaho 35,000 14 21,000 17
Illinois 344,000 15 44,000 15
Indiana 183,000 17 47,000 15
Iowa 52,000 13 34,000 13
Kansas 61,000 14 29,000 14
Kentucky 85,000 16 64,000 20
Louisiana 156,000 20 38,000 25
Maine 16,000 12 13,000 15
Maryland 124,000 11 5,000 18
Massachusetts 120,000 10 (b)  (b) 
Michigan 267,000 17 58,000 18
Minnesota 101,000 11 34,000 13
Mississippi 57,000 20 76,000 25
Missouri 135,000 15 63,000 21
Montana 13,000 18 19,000 15
Nebraska 41,000 15 20,000 14
Nevada 91,000 17 7,000 13
New Hampshire 11,000 7 9,000 11
New Jersey 209,000 12 (a)  (a) 
New Mexico 57,000 20 34,000 24
New York 528,000 16 41,000 17
North Carolina 267,000 17 87,000 22
North Dakota 7,000 10 10,000 13
Ohio 301,000 17 87,000 19
Oklahoma 94,000 17 48,000 18
Oregon 102,000 16 23,000 20
Pennsylvania 275,000 13 38,000 15
Rhode Island 24,000 13 (a)  (a) 
South Carolina 143,000 18 33,000 25
South Dakota 10,000 11 14,000 14
Tennessee 192,000 19 56,000 20
Texas 1,048,000 19 136,000 21
Utah 88,000 12 11,000 12
Vermont (b)  (b)  9,000 13
Virginia 162,000 11 32,000 18
Washington 157,000 12 22,000 17
West Virginia 34,000 17 23,000 20
Wisconsin 121,000 14 37,000 13
Wyoming (b)  (b)  10,000 11

(a): State contains no non-metropolitan counties (b): Omitted due to insufficient sample size Note: Here “rural counties” refers to children who live outside of metropolitan statistical areas, as defined by the Office of Management and Budget. Each county is defined as either in a metropolitan area or as a non-metropolitan (rural) county. Source: CBPP estimates based on 2013-2015 American Community Survey data and Tax Policy Center table T17-0228. For more details, see the Technical Appendix.

 

APPENDIX TABLE 3
Children Under 17 in Working Families Receiving Less Than the Full Child Tax Credit Increase Under Senate Bill, by Metropolitan and Rural Counties
  Living in Metropolitan Counties Living in Rural Counties
  Number Percent Number Percent
US Total 22.2 million 40 4.2 million 47
Alabama 318,000 44 113,000 53
Alaska 31,000 28 23,000 40
Arizona 617,000 47 46,000 63
Arkansas 178,000 47 126,000 58
California 3,433,000 44 66,000 48
Colorado 341,000 34 59,000 45
Connecticut 179,000 28 6,000 20
Delaware 68,000 38 (a)  (a) 
Dist. of Columbia 35,000 39 (a)  (a) 
Florida 1,557,000 46 68,000 57
Georgia 811,000 45 186,000 54
Hawaii 74,000 33 22,000 43
Idaho 113,000 44 66,000 51
Illinois 889,000 38 119,000 42
Indiana 456,000 42 135,000 44
Iowa 131,000 34 102,000 38
Kansas 166,000 38 90,000 44
Kentucky 211,000 41 156,000 48
Louisiana 354,000 45 81,000 52
Maine 45,000 33 40,000 45
Maryland 350,000 30 11,000 39
Massachusetts 314,000 26 3,000 26
Michigan 624,000 39 153,000 48
Minnesota 269,000 30 95,000 37
Mississippi 137,000 48 174,000 56
Missouri 338,000 37 159,000 53
Montana 30,000 42 49,000 39
Nebraska 102,000 37 62,000 42
Nevada 258,000 48 22,000 41
New Hampshire 36,000 23 26,000 32
New Jersey 538,000 30 (a)  (a) 
New Mexico 145,000 52 78,000 54
New York 1,308,000 39 103,000 43
North Carolina 691,000 44 220,000 55
North Dakota 19,000 26 25,000 32
Ohio 715,000 40 216,000 46
Oklahoma 259,000 46 129,000 49
Oregon 258,000 40 62,000 53
Pennsylvania 720,000 35 110,000 43
Rhode Island 65,000 36 (a)  (a) 
South Carolina 353,000 45 75,000 57
South Dakota 30,000 34 40,000 40
Tennessee 451,000 45 143,000 52
Texas 2,610,000 46 333,000 52
Utah 281,000 38 36,000 42
Vermont 10,000 27 24,000 35
Virginia 453,000 31 81,000 45
Washington 446,000 35 65,000 50
West Virginia 82,000 42 56,000 48
Wisconsin 309,000 35 109,000 38
Wyoming 11,000 30 29,000 32

(a): State contains no non-metropolitan counties
(b): Omitted due to insufficient sample size

Note: Here “rural counties” refers to children who live outside of metropolitan statistical areas, as defined by the Office of Management and Budget. Each county is defined as either in a metropolitan area or as a non-metropolitan (rural) county.

Source: CBPP estimates based on 2013-2015 American Community Survey data and Tax Policy Center table T17-0228. For more details, see the Technical Appendix.

 

Technical Appendix

This analysis examines families (that is, tax filing units), children, and parents left behind by the Child Tax Credit (CTC) proposal introduced by Senate Republicans in November 2017.[18]  We assess the CTC proposal (namely, increasing the maximum credit to $2,000 per child, while decreasing the earnings threshold to $2,500 and limiting the refundable portion to $1,100 per child in 2018) alone, without regard to the bill’s other tax changes.[19]

The analysis is based on data from the Tax Policy Center (TPC) and the Census Bureau.  CBPP used TPC data for the nationwide number of working families and children who would receive $75 or less from the CTC expansion.[20]  We used the Census Bureau’s March 2017 Current Population Survey (CPS) public-use file to estimate the nationwide number of children in working families that would receive more than $75 but whose incomes are too low to receive the full credit of $2,000 per child.[21]  Family incomes (and corresponding tax liabilities) are adjusted for inflation to approximate 2018 levels.  Children age 17, who are newly eligible for the credit under the proposal, are accounted for when estimating their family’s benefit, but are not included in counts of children receiving less than the full increase.

Characteristics of the children receiving less than the full benefit are estimated using the CPS-based share of children left out in each demographic group, applied to the national totals.  Those that would receive only a token increase and those that would receive more than $75 but less than the full credit of $2,000 per child are calculated separately. 

Numbers and characteristics of working parents are estimated using CPS-based average numbers of parents per 100 left-out families, applied to the national family totals.[22]  (Again, those that would receive only a token increase and those that would receive more than $75 but less than the full credit of $2,000 per child are calculated separately.)

For state-by-state figures, CBPP used public-use files from the larger American Community Survey for 2013 through 2015.  We averaged three years of ACS data to further increase the reliability of the state estimates.  We used the ACS data to assign each state its estimated share of TPC’s total 10.3 million children in working families with earnings too low to receive more than $75 from the proposal[23] and the CPS-based total 16.2 million children in working families receiving more than $75 but less than the maximum credit. [24]

In the state tables, totals for children in working families include children under age 17 (the age eligible for the CTC) in tax filing units in which the filer or spouse worked one or more weeks.  Elsewhere in this analysis, “working” generally refers to tax units with earnings.

End Notes

[1] CBPP estimates based on March 2017 Current Population Survey data and Tax Policy Center table T17-0228.  For additional details, see the Appendix.

[2] The amount by which many of these families could benefit would increase gradually over time, because the maximum refundable credit would be indexed for inflation.  However, the amount of the credit that would be refundable would not reach $2,000 until after 2048.

[3] “Rural counties” refers to children who live outside of metropolitan statistical areas, as defined by the Office of Management and Budget. Each county is defined as either in a metropolitan area or as a non-metropolitan (rural) county.

[4] These parents work 35 or more hours per week, in accordance with the Bureau of Labor Statistics definition of full time, and at least 27 weeks of the year.

[5] The EITC is older and more studied than the CTC, but the CTC, like the EITC, is available only to working families and phases in as earnings rise.

[6] For an extended discussion of the research, see Chuck Marr et al., “EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds,” Center on Budget and Policy Priorities, updated October 1, 2015, https://www.cbpp.org/research/federal-tax/eitc-and-child-tax-credit-promote-work-reduce-poverty-and-support-childrens.

[7] Kerris Cooper and Kitty Stewart, “Does money affect children’s outcomes?,” Joseph Rowntree Foundation, October 22, 2013, https://www.jrf.org.uk/report/does-money-affect-children%E2%80%99s-outcomes.

[8] Gordon B. Dahl and Lance Lochner, “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” American Economic Review 102, No. 5, May 2012, 1927-56.  The lowest quartile consisted of families earning less than $18,031 (in 2000 dollars).  The middle two quartiles consisted of families earning between $18,031 and $41,790, while the fourth quartile included families earning more than $41,790.

[9] Jeanne Brooks-Gunn and Greg J. Duncan, “The Effects of Poverty on Children,” The Future of Children, Vol. 7, No. 2, Summer/Fall 1997.

[10] See for example Marco Rubio, “We’re Not Supporting Legislation That Doesn’t Cut Taxes for Working Families with Children,” Sunshine State News, November 1, 2017, http://sunshinestatenews.com/story/were-not-supporting-legislation-doesnt-cut-taxes-working-families-children.

[11] For an analysis of the House CTC proposal, see Chuck Marr, Chye-Ching Huang, Arloc Sherman, and Emily Horton, “House Tax Bill’s Child Tax Credit Increase Excludes Thousands of Children in Low-Income Working Families in Every State,” Center on Budget and Policy Priorities, November 9, 2017, https://www.cbpp.org/research/federal-tax/house-tax-bills-child-tax-credit-increase-excludes-thousands-of-children-in-low.

[12] Senator Marco Rubio, “Rubio, Lee Statement on Senate Republican Tax Reform Bill,” November 9, 2017, https://www.rubio.senate.gov/public/index.cfm/press-releases?id=1E0BB0EB-5E7D-4682-B0E2-339B8C592F5D.

[13] Senator Marco Rubio, “Disrespectful & wrong to argue that lower income workers don’t pay taxes. #ChildTaxCredit should apply to payroll tax not just income tax,” Twitter, November 16, 2017, https://twitter.com/marcorubio/status/931136557246971904.

[14] Nancy Cook, “Ivanka Trump Pitches Conservatives on Child Tax Credit,” Politico, September 6, 2017, http://www.politico.com/story/2017/09/06/ivanka-trump-child-tax-credit-conservatives-242400.

[15] Rep. Rosa DeLauro introduced legislation (H.R. 821) that would eliminate the CTC’s $3,000 earnings threshold, allowing the credit to phase in from the first dollar of earnings, and increase the phase-in rate to 45 percent for all families.  The DeLauro proposal would also increase the maximum credit to $3,600 for children under age 6.  Senators Sherrod Brown and Michael Bennet have introduced legislation that would increase the maximum CTC to $3,000 per child under 19 ($3,600 for children under age 6) and make the credit fully refundable for all families (S. 2018).  Another proposal would create a supplement of $1,000 per child under age 5 that phases in at a rate of 50 percent from the first dollar of earnings.  See Elaine Maag and Julie B. Isaacs, “Analysis of a Young Child Tax Credit,” Tax Policy Center, September 12, 2017, http://www.taxpolicycenter.org/publications/analysis-young-child-tax-credit.

[16] CBPP calculations based on data from the Joint Committee on Taxation and Tax Policy Center T17-0061.

[17] Sharon Parrott, “Commentary: Republican Tax and Budget Agenda Would Leave Most Low- and Middle- Income Children Worse Off,” Center on Budget and Policy Priorities, October 4, 2017, https://www.cbpp.org/federal-tax/commentary-republican-tax-and-budget-agenda-would-leave-most-low-and-middle-income.

[18]  Joint Committee on Taxation, “Description of the Chairman’s Modification to the Chairman’s Mark of the ‘Tax Cuts and Jobs Act,’” November 14, 2017, https://www.jct.gov/publications.html?func=startdown&id=5037.

[19] The CTC proposal also increases the income levels at which the credit begins phasing out with inflation, allowing higher-income families to newly claim the credit or claim a larger credit.

[20] TPC estimates the number of working families (and children in those families) with earnings too low to qualify for any CTC and with earnings too low to qualify for the full CTC, excluding families with no earnings.  These two groups combined approximate the number of working families that would receive only token assistance from the Senate CTC proposal.  See http://www.taxpolicycenter.org/model-estimates/distribution-amount-child-tax-credit-october-2017/t17-0228-distribution-tax-units.

[21] The surveys do not ask families directly about taxes.  Our tax calculations in the CPS rely on large part on Census Bureau estimates of surveyed individuals’ adjusted gross income, taxable income, federal income tax owed, and dependency relationships included on the CPS file.

[22] Averages (including average numbers of working parents by occupation) are applied to national totals of families receiving less than $75 (5.1 million, from TPC) and receiving more than $75 but less than the full $2,000 credit per child credit (8.2 million, from CBPP analysis of CPS data).

[23] We use the ACS to estimate each state’s share of children in families receiving less than $75, and multiply this share by the TPC total.  The ACS estimate (10.2 million nationally) is quite similar to the TPC-based estimate (10.3 million).

[24] The ACS-based estimate of children receiving more than $75 but less than the full increase (16.4 million) is quite similar to the CPS estimate (16.2 million).