When the expansion of the Child Tax Credit (CTC) expired at the end of 2021, nearly 19 million of the poorest children stopped receiving aid because their parents’ income was too low to qualify for the tax credit. The expiration of the credit functioned as a de facto tax increase for our most vulnerable families, just as they were struggling to manage the ramifications of significant inflation. Meanwhile, parents earning up to $400,000 per year continued to receive up to $2,000 per child per year.
Negotiations are currently underway to reinstate some provisions of the expanded tax credit and again make it fully refundable — meaning families could receive the full amount for which they were eligible without first hitting income or tax thresholds. This would extend support to the neediest children and parents. If appropriately coordinated with other welfare, social security, and public health benefits, this tax policy can sustain families while also having the potential to streamline the scope of the federal government.
Permanently expanding the CTC is an important and cost-effective policy that supports American families and encourages employment. Not only does it reduce child poverty and suffering now, it supports a better future for our children.
This is your opportunity to let your legislators know you support the Child Tax Credit and to encourage House and Senate leadership to support including it in broader legislation. In just a few minutes, you can submit a letter to your elected representatives using our letter-writing tool. Read more below about the Child Tax Credit and the way it helps families and businesses. Then, invite your legislators to support American families by extending and expanding the Child Tax Credit. Talk about the Child Tax Credit with your friends and family, and invite them to participate in this call to action as well. Go HERE to submit a letter.
History
In 1987, the National Commission on Children was established by an act of Congress and approved by President Ronald Reagan. After traveling the country to observe the conditions in which children were living and being educated, the commission made a report in which it noted dire problems, but it also reported that, “We met loving and dedicated parents from all walks of life striving to nurture and provide for their children, sometimes against overwhelming odds. And perhaps most importantly, we talked to bright and eager children of all ages who are the hope and the future of our nation.”
Among the proposals in their report was a child tax credit of $1,000 per year, as part of a plan to “stem the rising tide of poverty and economic instability that threatens the health and well-being of so many of our youngest citizens.” For decades, the federal government had offered personal tax exemptions as a mechanism to indirectly support familial development — families with children were allowed to keep more of their taxable income. However, the commission noted that the relative value of these exemptions had declined significantly over the previous few decades, drastically increasing the tax burden felt by working-class American families.
A $500 credit was implemented in 1997 under the Clinton administration. It has been improved and increased by every president since then, regardless of the president’s political party or the party that controlled congress. Under the Tax Cuts and Jobs Act of 2017, which was passed during the Trump administration, the credit was worth $2,000, $1,400 of which was refundable. The American Rescue Plan of 2021 increased the amount of the CTC from $2,000 to $3,600 for children under 6, and to $3,000 for children ages 6 to 18. The credit was also made fully refundable. This flexibility provided much needed support for American families during the COVID pandemic.
Authorization for this credit has expired, and unless it is reinstated, many families will lose the ability to insulate their children from the consequences of childhood poverty. Additionally, changes approved under the Tax Cuts and Jobs Act of 2017 will expire in 2025, and the credit will fall to $1,000.
Terminology
It is important to understand the various tax law mechanisms the government has used to encourage family formation and child development.
Exemption: This is an amount that is deducted from one’s taxable income, indirectly reducing the amount of tax paid.
Tax credit: A specific amount deducted from the tax owed, directly reducing the amount of tax paid.
Refundable tax credit: A deduction from taxes owed, which is refunded to the taxpayer even if the total amount of taxes they owed was less than the amount of the credit. People with very low incomes, who pay little income tax, can still receive the full amount of a tax credit if it is refundable.
How does the child tax credit help both families and businesses?
Government investments have both symbolic and practical effects. Symbolically, investing in children communicates that our society values children and the work parents do to raise them. Practically, tax credits are a particularly effective and efficient means of government investment. The administrative infrastructure already exists, and research shows that every dollar of tax credit generates $1.50-2.00 in spending in local economies.
Child tax credits benefit families at all income levels. These credits can help provide basic needs, make it easier for families to have more children, or allow families to prioritize having a parent care for children in the home.
Children in families who receive the credit are more likely to graduate from high school and earn a higher income upon finishing school than those who don’t. Businesses benefit from a well-educated labor force.
Over the last three decades, states and businesses have come to rely on this longstanding credit when making policy decisions and setting budgets. Families plan annual budgets and personal spending based on an anticipated tax burden that includes the CTC. Making the CTC permanent would allow both families and businesses to plan for the future with reliable information about how the government policies will affect them.
As the child tax credit is negotiated, businesses may be able to work out compromises on government investment in research and development. Working out this aid to families through the legislative process allows various priorities to be balanced.
Why is MWEG engaging now?
Mormon Women for Ethical Government’s Principle of Ethical Government 2(e) states that: “The family is the fundamental group unit of society and also has the right to respect and protection under the law.”
All families deserve respect and protection. Families that struggle to provide for their children should be a special priority for our government. Government policies that expressly value children’s welfare and development communicate the value our society places on families and children.
Supporting the CTC is also in line with MWEG’s Principle of Ethical Government 3(e): “Economic and social inequity damages the moral fabric of societies and weakens democratic governments. People should act freely to implement measures that promote equality of opportunity for their fellow human beings (see Alma 4:12-13; 3 Nephi 6:9-16; and D&C 49:20).”
According to the Brookings Institution, “. . . multiple studies have found, the expanded credit of 2021 substantially reduced food insecurity among children, eased other hardships, and achieved these gains without leading parents to leave the workforce or prompting increased spending on alcohol, tobacco, or drugs. A fully refundable CTC would have particularly strong effects among Black and Latino families and advance racial equity.”
Comments