Recent Event Highlights Bipartisan Support for Expanding Earned Income Tax Credit, Child Tax Credit

Experts on both sides of the political aisle agree that the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide a crucial safety net for families, and that key reforms can help the credits further boost income for working families and households without children.  

On April 20, Former House Speaker Paul Ryan’s American Idea Foundation hosted a panel discussion featuring Northwestern University Professor Diane Whitmore Schanzenbach, and American Enterprise Institute education and poverty researchers Scott Winship and Katharine Stevens.

President Joe Biden’s American Rescue Plan, passed by Congress in March, enacted temporary expansions to the CTC and EITC. Whitmore Schanzenbach noted that the credits are the base of American anti-poverty policy for families with children, and the recent expansions will be critical to COVID-19 recovery.

“What we did was look at employment and how employment responded after the five major expansions in Earned Income Tax Credit,” Whitmore Schanzenbach said. “Across three decades, the EITC expansions led to increases in employment.”

Stevens echoed this idea, proposing that adults without dependents should be able to access a larger EITC. Employment rates among adults without children have fallen in recent years and expanding the EITC to provide them a greater benefit will help increase workforce participation.

The support for lower-income workers the credit provides could be critical for post-pandemic recovery, but does little to assist people facing unemployment, Whitmore Schanzenbach said. However, the credits’ benefits for working families are important for bipartisan support, Winship said.

Stevens and Whitmore Schanzenbach discussed potential opportunities to strengthen the social safety net through tax credits and other means. Reforming the CTC to be a “borrowable benefit,” allowing parents to receive future child benefits when they are most in need, could be a way to better support families, Stevens said.

“Our idea was that these dollars given upfront in the child’s life, when the development is most important, gives parents a lot more choice in how and who is going to be raising their kids,” Stevens said.

The impact that the EITC and CTC can have on childhood health and development is one of the strongest points for their ongoing reform and expansion, the panel agreed.

“There is strong evidence that the benefits conveyed by the EITC have lasting impacts on kids. There is better infant health, better school performance, higher college enrollment, and higher earnings in young adulthood,” Whitmore Schanzenbach said. “This is an investment that pays off over a lifetime for kids.”