Bailout Package Lends Some Relief to Low-Income Families

SOURCE: Flickr/carf

Child Tax Credit provisions in the bailout bill will extend relief to the families of over 13 million low-income children.

By Joy Moses | October 7, 2008

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Attached to Congress’ approval of the bailout package is a brief two sentence provision that will bring welcome relief to the families of over 13 million low-income children. The provision expands the reach of the Child Tax Credit, which will help families cope with the growing financial challenges associated with the current economy.

The Child Tax Credit includes two pathways through which families can receive a benefit. Today’s legislation affects only one of those pathways—the refundable portion of the credit, which can always be collected even if a family owes little or no money in taxes. The existing law completely excluded families making under $12,050 in 2008. The new amendment lowers that floor to $8,500, making nearly 3 million children newly eligible and allowing 10.1 million to receive an increased monetary benefit.

The $12,050 a year minimum historically left the neediest families behind. An estimated 10.6 million children in low-income families were completely ineligible for the Child Tax Credit in 2007, and an additional 11 million low-income children received less than the full benefit amount of $1,000 per child—all while families making $75,000-$100,000 received the greatest benefit. Families that have been excluded include those who have low wages because they have a full-time job that pays the minimum wage or a little above, are employed in temporary and itinerant jobs, or have spent some time away from the workforce due to family illness or disability.

Congress’ decision to allow more families to qualify for the child tax credit will bring economic relief to working families, especially during this era of tightening budgets. Future policy directions can and should go even further by extending the credit to all low-income families, including those that make under $8,500. The Center for American Progress has developed a comprehensive plan for cutting poverty in half that includes a proposal for extending the child tax credit to all low-income children. This proposal would reduce poverty by 3.3 million people, including 2.1 million children.*

*Based on an alternative measure of poverty derived from standards developed by the National Academy of Sciences.