Bill Would Eliminate Child Tax Credit for Many Low-Income Families in 2018

The Child Tax Credit (CTC) provides families as much as $1,000 per child in tax relief. This partially refundable credit, when combined with the Earned Income Tax Credit (EITC), lifted 5.3 million children out of poverty in 2012, helping to improve the lives of low-income working families.

Legislation (H.R. 4935) sponsored by Rep. Lynn Jenkins (R-KS) would permanently extend the credit to higher-income families (increasing the annual income eligibility cap for full benefits from $110,000 to $150,000). At the same time, it would allow the lower qualifying earnings level for working poor families, passed in 2009, to expire. Under the House proposal, a married couple with two children making $150,000 a year would receive $2,200 more than they currently receive under the CTC, while a single mother with two children working full-time at the minimum wage ($7.25 an hour) would lose a tax credit of $1,725. In other words, this legislation would increase the number of working Americans living in poverty and increase inequality.

One in five American children currently lives in poverty, and one in four children under age five lives below the poverty line in America. “Letting the Child Tax Credit improvement for low-income working families expire after 2017 will push 12 million people – including 6 million children – into or deeper into poverty,” according to analysis of census data by the Center on Budget and Policy Priorities. 

The following chart from Citizens for Tax Justice compares the House legislation (paired with allowing certain stimulus provisions to expire) and a plan from the White House to make permanent the improvements to the Child Tax Credit for working poor families. It examines the share of benefits that three different income groups would receive from each proposal:

The report goes on to notes that:

• Both the House proposal and the president’s proposal will cost an estimated $11 billion per year.
• The House proposal raises the earnings that lower-income families must have to access the Child Tax Credit from $3,000 to more than $10,000 and raises the cap for high-income families to receive the full credit from $110,000 to $150,000.
• The president’s proposal would allow families making as little as $3,000 per year to continue to receive the credit and would not increase access to the credit for high-income families.

Although the House legislation is unlikely to be taken up in the Senate, the president has released a veto threat, criticizing the bill’s treatment of low-income working families:

After 2017, H.R. 4935 would effectively eliminate the Child Tax Credit for 5 million families, while cutting it for 6 million more.

The Child Tax Credit has been providing relief to young families since it was enacted under the Taxpayer Relief Act of 1997. It was significantly expanded in 2001. Almost 37 million families utilized the Child Tax Credit in 2012.