Bipartisan Bill to Expand Federal Child Tax Credit Awaits Senate Approval
Izzy Rassel
On January 31st, the House advanced a $78 billion bipartisan package to temporarily expand the federal Child Tax Credit (CTC) and restore several business tax benefits. Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Jason Smith (R-MO) unveiled the bill in early January to expand the current CTC and provide more financial relief to low-income families. If enacted, the expanded federal tax credit would provide eligible households an average tax cut of $680.
The new CTC expansion would help many low-income families across the nation, especially those with multiple children. The new bill would also incrementally increase the CTC for the taxable years 2023 through 2025 and adjust the credit for inflation. Refunds would increase from $1,800 in 2023 to $1,900 in 2024 and $2,000 in 2025.
Under the current federal CTC, parents can receive up to $2,000 per child, but only $1,700 of the credit is refundable. Part of the proposed expanded federal CTC would enable lower-income families to claim more of the refundable credit.
According to the Center on Budget and Policy Priorities (CBPP), “In the first year, the proposal would lift as many as 400,000 children above the poverty line and make an additional 3 million children less poor as their incomes rise closer to the poverty line.”
Today, about 10% of Americans fall below the minimum earning threshold.
The new bill would require a minimum earnings threshold of $2,500 to claim the CTC. To help more families qualify for the credit, the expanded federal CTC will offer families the option to report their earnings from the current year or the year prior when filing their taxes. Recent analysis also found that permanent expansion of the CTC in the U.S. predicts relatively modest effects on employment as a share of the workforce, with more than 99% of working parents continuing to work.
After the pandemic era CTC ended, poverty levels increased from 5.2% to 12.4%. The failure to renew the CTC when it lapsed negatively impacted families as they battled skyrocketing inflation and the increased cost of everyday goods like housing, food, and utilities.
The next stop for the expanded CTC bill will be to the Senate where it will require 60 votes to pass. The expanded CTC would provide families with more financial stability, whether that means putting their income toward more food on the table or being able to afford childcare. If the proposed CTC is fully in effect in 2025, it would help roughly 5 million more children come closer to being out of poverty.