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Congress is looking at expanding the child tax credit again. Who would benefit?


Congress is looking at expanding the child tax credit again. Who would benefit?

Feb 09, 2024 | 2:05 pm ET
By Ashley Murray
Congress is looking at expanding the child tax credit again. Who would benefit?
Children complete a mural celebrating the launch of the Child Tax Credit on July 14, 2021 at the KU Kids Deanwood Childcare Center in Washington, D.C. (Jemal Countess/Getty Images for Community Change)

WASHINGTON — The bipartisan tax package passed by the U.S. House last month is not a done deal, but the proposal’s supporters say it could restore some poverty-reducing benefits that reached millions under the pandemic-era child tax credit expansion.

A majority of low-income families who do not currently qualify for the full credit would see some increase just within the first year of the three-year deal, according to an analysis by the Center on Budget and Policy Priorities.

The center estimates within the initial year of the legislation, if enacted, 16 million of the 19 million children in low-income households that don’t receive the full credit because of low earnings would benefit.

States topping the list of where those children live include California, Texas, Florida, New York, Georgia, Illinois, Ohio, North Carolina, Pennsylvania and Michigan, in that order.

“This is really Congress’ only shot this year to pass legislation that would substantially boost the incomes of millions of low-income families and substantially lower child poverty,” said Stephanie Hingtgen, research analyst for the liberal-leaning Center on Budget and Policy Priorities.

A successful bipartisan, bicameral legislative package would be a rare win for both lawmakers and the administration, particularly during an election year. Many of those parents who would see gains live in key 2024 swing states.

The CBPP’s analysis calculates that roughly 400,000 children would be lifted above the poverty line within the first year. The overall benefits would reach families across race and ethnicity, and would particularly help families in low-income rural areas, according to an additional report.

Hingtgen found that families of 2.5 million children in rural areas would see an increase in the first year. Georgia, Kentucky, Mississippi, North Carolina, Ohio, and Texas would each see more than 100,000 children benefit in their respective rural communities, she reported.

Both Democrats and Republicans tout the deal, dubbed the Tax Relief for American Families and Workers Act, as a compromise because it would expand the child tax credit while extending Trump-era corporate tax incentives through 2025. The bill is co-sponsored by Sen. Ron Wyden, an Oregon Democrat.

Increasing child tax credit benefits has been a rallying cry for Democrats since the temporary pandemic-era expansion for 2021 lifted more than 2 million children out of poverty, according to census data.

Recent history of the child tax credit

The tax break amount per child was doubled under the Tax Cuts and Jobs Act of 2017, from up to $1,000 to up to $2,000 per child under age 17. The actual refundable portion of that credit for 2023 — meaning how much a parent could see in a refund check after his or her tax liability — is capped at $1,600.

However, low-income earners hardly ever hit the full refund amount because it phases in at 15% on the dollar for earned income above $2,500. Households that earn less do not even qualify.

As the current law stands, a single parent with two children would need to earn about $29,000 annually to receive the full credit, or about $34,000 for married parents, according to the Center on Budget and Policy Priorities. Families with more than two children would need an even higher annual income level to realize the full credit.

As the U.S. was digging out from under the COVID-19 economic fallout, Congress approved a one-year expansion of the tax credit to $3,000 per child under age 18, and $3,600 for those under age 6 — even for families who made $0 to $2500 in income. Lawmakers made the entire amount refundable, and a portion of it was sent to families in monthly installments.

Advocates hailed the research findings that showed the temporary move was a game changer for poverty in the U.S.