Proposal would permanently increase child tax credit: How much families would get

Child poverty was driven to an unprecedented low last year, thanks in part to a bigger-than-ever child tax credit. As U.S. lawmakers enter their lame-duck session, they’ll have to decide whether to permanently expand the credits, which dropped back to pre-pandemic levels this year. Advocates for children say doing so could keep more than half a million Michigan kids out of poverty.

“The success of the 2021 Child Tax Credit expansion showed us that high child poverty rates are a policy choice, not an inevitability,” wrote Chuck Marr, vice president for federal tax policy at the Center on Budget and Policy Priorities. “The choice before Congress this year is simple: They can act, or they can see millions of children fall back into poverty.”

How much is the child tax credit?

Pandemic-era changes to the child tax credit were part of the reason child poverty dropped by half in 2021, to a historic low of around 5%. But the Michigan League for Public Policy points out what it calls a flaw in the credit’s design: It was never available to families with the lowest incomes.

The proposed expansion would permanently increase the annual child tax credit from $2,000 to $3,000 per qualifying child, with an additional $600 for children who are 6 years old or younger in households within adjusted gross income limits. The proposed expansion would also allow parents to claim the credit for children up to 17 years old.

The expansion proposal would allow all families with children who make less than the income ceiling to receive the full amount, regardless of how many hours they work or how much they earn. 

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That has some tax experts shaking their heads, including Scott Hodge, the founding father of the very idea of a child tax credit and longtime leader of the Tax Foundation. Hodge published an op-ed in the Wall Street Journal saying expanding it would be a “bad idea.” He wrote that the credit, which he originally suggested in a 1993 paper and which was first enacted in 1997, should take the blame for driving up the number of households who don’t pay income tax. The Tax Policy Center expects 44 million tax filers to pay no income tax in 2022, thanks in part to the child tax credit. 

Furthermore, Hodge pointed to an analysis prepared by the Joint Committee on Taxation that found the proposed expansion would cause people to leave the workforce and ultimately shrink economic output, reducing revenue by $1.3 trillion over the next 10 years.

Other research shows otherwise, including a University of Michigan paper that found no evidence the expanded child tax credit affected labor supply or led to significant decline in employment among families with low incomes.

Support from former Treasury secretaries

“This is not enough money for people to go quit their jobs and go to the Bahamas,” said Danielle Atkinson, founder and national executive director of Detroit-based Mothering Justice. Mothers who did receive the credit last year told Atkinson they were able to stop working third shift hours and instead could spend time helping kids with homework. Most of the moms she heard from spent it on things like after-school programs or an extra pair of shoes for their kids.

“In Michigan, we have 44% of the population not able to meet the basic needs,” Atkinson said. “Something like this is not only good for an individual but it's good for the economy.”

U.S. Reps. Andy Levin and Rashida Tlaib were two of 58 lawmakers who signed a letter urging congressional leadership to oppose legislation containing corporate tax breaks without also enshrining the child tax credit for working-class families.

"In the lame duck session, Congress will be taking up legislation to pass the largest annual military budget of any nation in the world. What does that say about our priorities?" Tlaib wrote in an email to the Free Press. "Instead, we should be fighting like hell to invest those funds in working families, making sure that every child has clean air and water, and the opportunity to thrive."

Tlaib introduced the End Child Poverty Act in February 2022, a bill that replaces the earned income tax credit and the child tax credit with a universal child assistance program that would send monthly payments to each child of a taxpayer under the age of 19.

"I will not stop fighting to advance this legislation," Tlaib wrote. "It’s absolutely critical that we deliver for working families struggling to make ends meet and reinstate the child tax credit before the 117th Congress adjourns. Inaction is unacceptable.”

Two former secretaries of the Treasury also expressed their support for the expansion in a New York Times op-ed, arguing the proposal would, on the whole, “tamp down inflationary pressure.” They also pointed out the inequitable effects of current policy.

“Before last year’s changes to the child tax credit, the parents of 23 million children received either a partial credit or none at all, because their earnings were too low to qualify for the full credit,” Robert Rubin and Jacob Lew wrote. “This left out or shortchanged about half of Black and Latino children, half of children in rural areas and almost one in four white children. The families who needed the credit the most received the least.”

The former secretaries wrote that expanding the credit was the morally right thing to do.

More:Michigan’s child care crisis worse than policymakers believe

More:A Detroit nonprofit got a $1 million gift. Its approach: Stick with kids no matter what.

Monique Stanton, president and CEO for the Michigan League for Public Policy, agrees. “We go back to prioritizing our values,” she said. “We value young people, we value children, we value families. And so, in a time when we're looking at large corporate tax cuts, we really want to make sure that our most vulnerable people — who are parents and children — have access to this needed resource.”

Stanton said not passing the legislation would be “devastating” for children in Michigan — and up to 19 million kids nationwide.

“We saw how successful it was during COVID and we can do it again,” said Stanton. “If we want to help children and prevent them from living in poverty and all the poor outcomes that go along with that, here's a great opportunity for us to do that.”

Politico reported that Senate Finance Chair Ron Wyden, D-Oregon, said the Child Tax Credit was front and center in what was likely to be a big debate in the lame duck session.

Jennifer Brookland covers child welfare for the Detroit Free Press in partnership with Report for America. Make a tax-deductible contribution to support her work at bit.ly/freepRFA. Reach her at jbrookland@freepress.com.