What’s in the bill to expand the child tax credit and how it can help struggling families

Geoff Bennett:

The federal child tax credit may soon be expanded as part of an effort by some lawmakers to ensure that more American families can access the benefit.

If the proposal becomes law, it would gradually increase the credit from $1,600 to $2,000 per child in 2025 and allow lower-income families to receive a refundable tax credit for each child. Right now, many only earn one tax credit for all of their children combined. It would also adjust the credits for inflation and increase what's available to those who pay little to no income tax.

Sharon Parrott is the president of the Center on Budget and Policy Priorities. That's a progressive think tank that studied this deal.

Thanks so much for coming in.

Sharon Parrott, President, Center on Budget and Policy Priorities: Thanks for having me.

Geoff Bennett:

So this new agreement would actually provide smaller benefits than the monthly payments that some Americans received under President Biden's COVID relief plan, but you still support this proposal. Why?

Sharon Parrott:

Yes, that's right.

So the Rescue Plan Act had a very large expansion in the child tax credit. It made the entire credit available to low-income families, regardless of their earnings. It increased the amount of the credit for all families, and it provided the credit on a monthly basis. And that is a very strong policy that lifted millions of people out of poverty.

And this is smaller than that, there's no question. But it still is helping 16 million children who now don't get a full child tax credit because their family's incomes are too low. And it's going to lift about 500,000, half-a-million, children out of poverty in 2025 when it's fully in effect.

So it is an important, meaningful step forward that provides real help to families today. And, yes, we should continue to work toward a more robust child tax credit that can do even more to lift kids out of poverty.

Geoff Bennett:

I want to ask you about some criticisms of this proposal.

The Wall Street Journal op-ed board says the package would undermine parents' incentives to work to receive the credit since they wouldn't have to earn as much income to qualify. Do you see it that way?

Sharon Parrott:

So let's be clear about what this proposal does. It says to a mom with a couple of kids who's working as a home health aide or a food server that they are going to be able to get a little bit more in their child tax credit.

They are going to be able to get maybe $1,000 more than they get under current law. That is money that she can use to pay a utility bill, to fix her car so she can keep going to work, to buy diapers, to buy food at the grocery store. This is providing real, meaningful help to working families that right now are shut out of the full child tax credit because their earnings are too low.

We have an upside-down policy right now where we give the least help to the families who need it the most. Now, let's be clear. Under this package, families still have to have earnings in order to qualify for the credit. And the credit, unfortunately, actually still phases in as earnings rise. So families with some of the lowest incomes will either not qualify for the credit at all or still qualify for a small credit.

But it is providing meaningful help to 16 million children.

Geoff Bennett:

The Committee for a Responsible Federal Budget in a written statement praised this proposal for finding offsets to help pay for it, but it also said it could still set the stage for substantially more debt over time. That's a direct quote.

And there's the thought that, given the popularity of this proposal, that it could become permanent and cost billions of dollars and add billions of dollars to the federal deficit over time.

Sharon Parrott:

Yes, let's be clear about what this proposal does.

There's a series of corporate tax breaks and it's paired with this modest, but important expansion of the child tax credit. These provisions in this package are temporary and, as you said, are fully paid for. If Congress comes back to make them permanent, of course, they would cost more.

And, at that point, Congress should pay for them. They should find offsets. And that's absolutely possible. If we ask high-income people and profitable corporations to pay a fair amount of tax, we can invest in low-income kids in ways that pay off for them, their families and the country as a whole.

Geoff Bennett:

Sharon Parrott, president of the Center on Budget and Policy Priorities, thanks so much for your insights. We appreciate it.

Sharon Parrott:

Thank you.