Designing a US Public Child Benefit That Respects Children and Families

The United States provides two major child benefits through the individual income tax system: the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). Both systems force families to run through a confusing gauntlet of bureaucracy just to receive support that's too late or too stingy. Other wealthy nations prove it doesn't have to be that way.

As Congress considers how to reform child benefits, the Center for Economic and Policy Research (CEPR) releases today, The Progressive Case for a Unified Child Benefit, by Senior Policy Fellow Shawn Fremstad, that proposes a well-designed, politically feasible child benefit plan. The report offers a set of criteria that any child benefit system under consideration should meet and uses those criteria to assess the current system, the temporary system found in the American Rescue Plan Act, and two other proposed plans.

"Any child benefit reform should function as a public investment in our nation's children, with simple and efficient access that treats children and parents with equal concern and respect," said Fremstad.

The report evaluates various other plans for how well they meet the criteria of a well-designed child benefit that is (1) broadly universal, (2) adequate on both an annual and monthly basis, (3) simple, and (4) visible in a way that creates positive "policy feedback loops" over time.

In addition to the CTC, EITC, and the temporary system in the American Rescue Plan Act, the report assesses two recent proposed plans, from the right and left, respectively: Senator Romney's Family Security Act and the People's Policy Project's American Child Benefit.

The main strength of the Romney plan is that it provides a broadly universal, simple, monthly benefit without an employment test or an upfront means test. The fundamental weakness is that it provides lower annual benefits than the American Rescue Plan to a substantial number of lower-income families with earnings, particularly working solo parents with no children under age 6, and provides higher benefits to a substantial number of higher-income families.

The People's Policy Project has proposed an American Child Benefit that has the strengths of the Romney plan without most of its weaknesses. However, its weakness is that some employed parents who have one child and currently receive both the maximum EITC and the CTC would receive a lower child benefit than they would under the American Rescue Plan.

"The Unified Child Benefit plan outlined in our report builds on the strengths of all three plans, while addressing their weaknesses, and remaining politically feasible in the near-term. It provides a simple, universal, and adequate child benefit that is visible in a way that builds public trust and reduces class divisions," explains Fremstad.