EXPAND CHILD TAX CREDITS

The current version of the Child Tax Credit (CTC) helps reduce the amount of taxes parents owe, providing up to $2,000 per child. Even if low-income families don't owe taxes, they can still get up to $1,600 per child from the IRS. However, not everyone qualifies for the full amount. Families need to earn at least $2,500 a year to get any CTC, and the amount they receive increases only as their earnings go up. Because of this, many low-income families only get a partial credit or none at all; over a quarter of children miss out on the full benefit because their parents' earnings are too low. 

The proposed Child Tax Credit expansion by Senator Ron Wyden and Representative Jason Smith aims to provide significant help to low-income families. Though smaller than the American Rescue Plan expansion, it would still benefit around 16 million low-income children in its first year, which is over 80% of those currently receiving partial or no credit due to low family income. Nearly 3 million children under 3 years old would benefit, and it would reduce child poverty by lifting up to 400,000 children above the poverty line and making 3 million children less poor initially. When fully implemented, it would lift over 500,000 children above the poverty line and help 5 million more children. Here is how increased Child Tax Credits would impact communities across the country:

Reducing Child Poverty: The expansion would benefit children of all races and ethnicities, especially those in groups facing historical and ongoing discrimination. In the first year, it would help: 

  • Over 1 in 5 children under 17 overall 

  • More than 1 in 3 Black and Latino children under 17 

  • 3 in 10 American Indian and Alaska Native children under 17 

  • 1 in 7 white and Asian children under 17 

Supporting Low-Income Families: The expansion would also financially benefit families, with:

  • Half of the 16 million children living in families gaining $630 or more

  • 40% in families gaining $1,000 or more 

  • 25% in families gaining $1,400 or more 

  • Half of the children in families with more than one child seeing gains of $1,000 or more.

Promoting Economic Stability: Providing families with additional funds stimulates the economy. Families are more likely to spend the extra money on goods and services, boosting local businesses and supporting economic growth.

Enhancing Child Development: Financial stability positively impacts children’s development. When families are less stressed about money, they can focus more on their children's education and well-being, leading to better academic and social outcomes.

Conclusion

The Child Tax Credit improves the lives of millions of American families. By providing financial support, it helps reduce child poverty, supports low-income families, promotes economic stability, and enhances child development. The temporary expansion under the American Rescue Plan Act showed its potential, highlighting the need for a permanent increase and full refund-ability to benefit all families. Advocating for a strengthened Child Tax Credit is essential for building a more equitable and prosperous future for all children and families.