Last week, officials from the White House, Senate and House of Representatives (known as the “Big Six”) released a framework for overhauling the tax system in the U.S. The framework states an intention to positively impact working families through a “significant increase” to the Child Tax Credit, yet it provides few specifics.
The few details that are included signal that the improvements needed to the Child Tax Credit to truly have a positive financial impact for children and families with the greatest need, such as full refundability, will not be made. Further, any increase to the Child Tax Credit would be offset by the elimination of exemptions that currently benefit working class families.
The U.S. Census Bureau recently reported that 18 percent of children (13.3 million) in the U.S. were living in poverty in 2016. Poverty is a particularly serious problem for children, who suffer negative effects for the rest of their lives after living in poverty for even a short time. Children in poor families were four times more likely to be in fair or poor health, nine times more likely to experience food insecurity and twice as likely to repeat a grade and drop out of high school.
While child poverty remains high in the U.S., it would be a lot higher without refundable tax credits, including the Child Tax Credit, which together with the Earned Income Tax Credit lifted nearly 4.5 million children out of poverty in 2016. Yet with so many children continuing to live in poverty, we know that these credits can do more to reach families living in poverty. Low refundability rates, a small maximum value and an earnings threshold of $3,000 have kept the Child Tax Credit from reaching the poorest families.
Earlier this year the Child Poverty Action Group, of which First Focus is a founding member, released a white paper which offers lawmakers a blueprint for using tax reform to improve the standard of living for children in the United States.
As we articulate in the white paper, for any tax plan to have a true impact in reducing child poverty, it must increase the Child Tax Credit in a way that targets low-income families with the greatest need. A good framework to achieve this goal is creating a Child Tax Credit that has greater refundability starting at the first dollar of earnings, and one that is indexed to inflation. This also includes increased access to the Child Tax Credit for children and families in Puerto Rico. Given the recent devastation caused by Hurricane Maria, this is more critical now than ever.
At the same time, any expansion of the Child Tax Credit must not come at the expense of the children of tax-paying immigrant families or through consolidation or cuts to other anti-poverty programs or tax policies, such as the Child and Dependent Care Tax Credit or Earned Income Tax Credit, that currently support children and families. Our principles and red-lines are further detailed in this recent joint statement.
The Child Tax Credit has a long history of bipartisan support and should continue to unite lawmakers and advocates across the ideological spectrum. This is why First Focus has signed a bipartisan statement focused on expanding the Child Tax Credit.
As Congress works to put together a tax plan, First Focus will continue to work in a bipartisan fashion to advocate for an improved Child Tax Credit that targets families most in need. As we pursue an improved Child Tax Credit that actually works to further reduce child poverty, we will continue to hold strong to our principles that progress in one area of family tax policy must not be offset by cuts to programs and other tax policies that serve children and families in need, including tax-paying immigrant families.
Please contact First Focus staff Cara Baldari, Rachel Merker or John Monsif with any questions.
Additional resources: