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To Fight Poverty, Economists Urge Congress to Bring Back Expanded Child Tax Credit

"Letting 9 million children in this country live in poverty is a policy choice," said analysts who called on lawmakers to prioritize children from the lowest-income households.

Experts on anti-poverty policies on Tuesday urged lawmakers weighing tax legislation to consider evidence that became strikingly clear in 2021: Guaranteeing that families have money on a monthly basis to provide for their children, via the expanded child tax credit, helped ensure that far fewer kids struggled with insufficient food and other essentials.

The Center on Budget and Policy Priorities (CBPP) noted that policymakers have reportedly begun negotiating a possible year-end tax bill and have already heard from dozens of pro-business groups from across the country that have called for a tax code that "supports innovation" and enables businesses to "finance growth."

To return to what analysts have called "a historic reduction in poverty" that was observed just two years ago, CBPP called on negotiators in Congress to include "a well-designed expansion of the child tax credit (CTC) in any tax legislation considered," with the children from the lowest-income households prioritized.

"Letting 9 million children in this country live in poverty is a policy choice, as recent census data underscores," wrote Chuck Marr, Kris Cox, and Sarah Calame at CBPP. "Policymakers have an opportunity to make a different—and better—choice in the coming weeks. They should prioritize reducing child poverty—and improving the life prospects of millions of children."

As Common Dreams reported in September, the opposition of Republican senators and right-wing Democratic Sen. Joe Manchin (W.Va.) led to the end of the expanded CTC, which helped push child poverty to a record low of 5.2% in 2021 as eligible families received up to $300 per child, per month. As a result, in 2022, the U.S. Census Bureau recorded the largest single-year increase in poverty among children in the U.S., which rose to 12.4%.

"If Congress had continued the American Rescue Plan's child tax credit expansion in 2022, about 3 million fewer children would have been in poverty, preventing more than half of the increase in the number of children in poverty last year, we estimate," wrote Marr, Cox, and Calame.

The decision to take thousands of dollars per year away from families struggling with the rising cost of living and stagnant wages was driven largely by Manchin's false claim that parents who were given money to help with the cost of childcare and groceries each month would spend the cash on drugs, but CBPP expressed hope that some Republicans facing tough reelection campaigns next year have signaled an interest in supporting the provision, which was backed by Republican, Independent, and Democratic voters in an Economic Security Project poll last year.

Civil society groups including the Maine People's Alliance (MPA) and Americans for Tax Fairness this week began calling on lawmakers to "put children first, not corporate profits" as they negotiate a tax bill.

"Right now, Congress is hearing from big business, not American families like yours," MPA told its supporters in a call to action. "We are the people who know how critical cash is to making a household work. We are the people our members of Congress need to hear from."

CBPP emphasized that "the details of any child tax credit expansion are important" and called for a particular focus on the children who have been left out of the credit in the past despite their families' struggles with the cost of housing, food, childcare, and other essentials.

The economists wrote that any tax bill must prioritize ensuring that 19 million children whose parents' incomes are too low to receive the full CTC must be "the focus of any child tax credit expansion."

Explaining that the current structure of the CTC is "upside down," they wrote that children in families with less than $2,500 in earnings are not eligible for any credit, while families with incomes below about $16,000 get less than $2,000 in total and middle- and high-income households receive the maximum of $2,000 per child.

For example, a childcare provider who has two children of their own and is a single parent might earn $15,000 per year and receive $1,875, while a married couple who employs the provider might earn $400,000 per year and receive $4,000 in CTC.

"The children who would benefit the most—children whose families face challenges affording rent, utilities, food, clothing, and transportation—often get the least," wrote the economists. "As a result, more children live in poverty than would if children in families with low incomes received the same child tax credit as children in families with higher incomes."

This inequity disproportionately affects Black, Indigenous, and Latino children whose parents are "overrepresented in low-paid work," noted CBPP.

The record low child poverty rate in 2021 was achieved by making the full CTC available to low-income families, raising the maximum credit from $2,000 per child to $3,600 for children aged 5 and younger and $3,000 for older children, and providing the credit on a monthly basis rather than a lump sum after taxes were filed.

Marr, Cox, and Calame explained that simply raising the maximum amount for the CTC would do little to help the families who need it most, and a proposal led by Rep. John James (R-Mich.) would still leave many low-income families with partial or no credit.

By contrast, the economists proposed making the current $2,000 CTC—often called the "fully refundable" credit—to the lowest-income households, which could lift an estimated 1.5 million children out of poverty and boost the income of the single parent in CBPP's example by $2,125—a significant difference for a regular household income of $15,000.

"As policymakers evaluate approaches to expanding the child tax credit" in end-of-year tax legislation, said Marr, Cox, and Calame, "they should seek to maximize the number of children with low incomes lifted out of poverty."

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