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Congress Must Save the Child Tax Credit: What You Need to Know and Why You Should Care

On June 13 of this year, the House Committee on Ways and Means passed the Tax Cuts for Working Families Act, which would increase the current standard deduction — or dollar amount subtracted from one’s income before they are taxed — and effectively eliminate the Child Tax Credit (CTC). 

Since its introduction in 1997, the Child Tax Credit has been providing support for American families in the developmentally crucial, and often financially tight, years of raising children. The CTC has evolved with bipartisan support in the past decades, reaching its current form in 2017: Households with a yearly income of up to $200,000 (or $400,000, in the case of a joint return) will receive a credit up to $2,000 for each financially dependent child under 17 who has lived with them for over six months. This credit is partially refundable, meaning that if the credit amount exceeds the income tax owed by a household, they can receive the remaining money via refund check. 

These refundability provisions have a significant positive impact for families. Extensive research, including a 2022 study by the Center on Budget and Policy Priorities (CBPP), reveals that when households receive income support from public policies like the CTC, the children of the household reap a range of short-term and long-term benefits, including improved grades, increased high school graduation rates, better mental health, and higher personal income as adults. 

The Child Tax Credit was especially effective at improving outcomes for children in 2021, when it was expanded as a feature of the American Rescue Plan. To help vulnerable families recover from the financial blow of the pandemic, the CTC was raised to $3,600 per child under six years of age and $3,000 per child six and older. Further, the credit was made fully refundable, meaning that households who owed little or no income tax could receive the remaining balance amount in their bank accounts. Previously, households with a monthly income below $2,500 made too little to be eligible, and households with an income between $2,500 and $30,000 could only receive partial credit. Increasing the CTC proved to be extremely effective at driving child poverty down from 9.7% in 2020 to 5.2% in 2021, shattering the 8.1% rate forecasted by the U.S. Census Bureau and the CBPP.

However, Congress failed to renew the expansion of the Child Tax Credit in 2022, and its current provisions are set to expire in 2025. While this year’s Tax Cuts for Working Families Act promises to combat the ill effects of inflation through an increased standard deduction, the standard deduction is already designed to take inflation into account, making the actual tax relief quite minimal, especially for families. Further, the two accompanying bills presented by the Ways and Means Committee also divert funds from those in the most need, focusing instead on tax breaks for businesses. With major contributions from the Tax Cuts for Working Families Act, 60% of this package’s benefits would flow directly to the top 40% of households by income. Contrary to its title, implementation of this act would harm, far more than help, American families, disabling a valuable, decades-old safety net. 

Applying a Public Justice Framework

The Center for Public Justice holds that in order for society to function healthily, its most basic institution — the family — must be equipped to thrive. Therefore, according to CPJ’s Guideline on Family,

“Public support of families during childbearing and childrearing periods should be of particular concern. That support may include provisions such as income-tax deductions for dependents, access to adequate health care, opportunities for work leaves by mother and father, and financial support for children’s education even into the post-secondary phase.”

Policies designed to support children are crucial: Children are entirely dependent on the adults in their lives and therefore become defenseless when their caretakers are rendered incapable. Scripture commands us, “Defend the weak and fatherless; uphold the cause of the poor and the oppressed” (Psalm 82:3), and “Speak up for those who cannot speak for themselves, for the rights of all who are destitute” (Proverbs 31:8). Children are deeply valuable in God’s sight, and our public policy ought to reflect a Christian conviction to protect and nurture these vulnerable image-bearers. 

CPJ’s Guideline on Welfare presents economic aid as a means of attending to the needy, and “receiving assistance should enable those in need to reach or return to self-sufficiency and be in a position to help others.” Through receiving the Child Tax Credit, parents and guardians are given agency in raising their children. This regular financial boost allows families to set aside funds with their children’s specific needs and wants in mind, empowering the family from within rather than necessitating dependence on a generalized system. Although the collaboration of civil society institutions, such as schools, nonprofits, and places of worship, also have an essential role in combating child poverty, the CTC serves as an important complement to these institutions and centralizes decision-making with those who know their children best (parents), creating a unique and dependable avenue for support. 

Congress faces a crossroads, one at which they can uphold family-supportive legislation through the Child Tax Credit, or discontinue it, passing the Tax Cuts for Working Families Act as is. However, even if Congress extends the CTC past 2025, it is in need of significant reinforcement. While inflation is factored into the proposed standard deduction of the Tax Cuts for Working Families Act, the $2,000 CTC legislated in 2017 is now worth approximately $1,600 in today’s dollars. To accomplish its intended effect, Congress needs to increase the CTC to roughly $2,500 per child. 

Further, Congress should consider the vast positive impact of the Child Tax Credit under the American Rescue Plan, when the sum became fully refundable, and therefore available to the most financially vulnerable families in America. While this extension was initiated in the wake of a global pandemic, many of the inequities COVID-19 heightened are still present and require immediate attention. For example, prior to the expansion of the CTC, 45% of Black and 35% of Latino children did not fully benefit from the credit, as their households earned too little, and they therefore owed less in income tax than the credit amount. These racial barriers remain, and while an effective response also originates from community institutions, the CTC presents an opportunity to erode such structural inequities. In addition, although critics of the American Rescue Plan stress that households should fulfill a work requirement in order to benefit from the CTC, there are a myriad of barriers to employment that should not exclude needy families from potentially life-saving aid. Even if parents or guardians are wilfully unemployed, their children should not live in poverty as a consequence. 

State governments have realized and reacted to the insufficiencies of the current Child Tax Credit — that is, the 2017 model that has been reinstated at the close of the American Rescue Plan. When the CTC expansion expired in 2022, several states decided to take on this financial commitment, meeting  the need for regular payments that reach low-income families. Colorado, Minnesota, New York, California, Maryland, Massachusetts, New Jersey, Vermont, and New Mexico all provide some amount of “guaranteed income” for low-income households allotted in the form of a child tax credit.

Another way the federal government can effectively channel financial support to families  is through granting assistance to families with newborns. In the current structure, it is more fiscally beneficial to have a baby later in the tax year, because this allows households to claim tax benefits early in the child’s infancy, when support is needed most. This unintentionally penalizes those with earlier births, when all households with newborns are already under the same economic strain. Representatives Suzan DelBene of Washington and Rosa DeLauro of Connecticut have introduced legislation that would give a $2,000 bonus to a household the month a baby is born, guaranteeing early financial support. This proposal, which is a component of the American Family Act, faces the 118th Congress, along with the opposing Tax Cuts for Working Families Act. 

Why Should We Care?

Readers who aren’t responsible for raising children — and don’t plan to be — may ask, why does this matter for me, if it doesn’t affect me? Why should I care?

Jesus’ example does not leave room for apathy, even toward those who we believe have no bearing on our own wellbeing.

The response to this question is twofold. Firstly, even those who will never raise a child will be directly impacted by the children of today as they mature into the adults of tomorrow. If children have the resources to flourish — a safe and consistent living space, nutritious food that is readily available, good education, space to explore personal interests, and the like — our society will be in good hands. 

Secondly, Jesus’ example does not leave room for apathy, even towards those who we believe have no bearing on our own wellbeing. As Khadija Adams, a maternal health advocate and community leader, expressed at CPJ’s 2023 Jubilee panel discussion, we often think of public policy in terms of  “winners and losers” — we want to “win,” and we therefore need to advocate for things that benefit us at the expense of the “losers.” However, as Adams reminds us, Jesus’ ministry was defined by his compassion, and resulting action, for individuals who had no direct impact upon him on a human level. As Jesus touched lepers, sat with dying children, dignified prostitutes, and fed families that he would never see again — much less be benefited by in a worldly sense — so too should we give our attention and effort to those outside our circle of influence. As Jesus reminded his disciples, “Whatever you did for the least of these brothers and sisters of mine, you did for me” (Matthew 25:40). 

Christian citizens must be actively involved in advocating for the Child Tax Credit, pursuing welfare for those in highest need of assistance rather than pushing a general measure of tax relief. Jesus embodies this faithful ordering of priorities as the Good Shepherd, who leaves the ninety-nine sheep to gather up and provide for the one in need, not resenting how far it has run. Aligned with his heart, we must first pursue the flourishing of the disadvantaged — in this instance, those economically disadvantaged by systematic injustices and situational challenges. With Christ as our witness and example, we recognize that this model for ministry extends from our personal to political life, leading us to support laws that will implement such grace and justice.

Joya Schreurs is a Shared Justice intern for the summer of 2023. She is a student at Dordt University, where she studies English and Theology.

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