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An Expanded Child Tax Credit

Given that research has shown that boosting poor children’s family income early in life has long-term effects on education, health, and earnings, an expanded tax credit also would likely have positive effects on children’s long-term economic mobility.

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idea_bulbThe Child Tax Credit, or CTC, is an important policy tool to address these challenges, providing families with up to $1,000 per child under age 17. However, in its current form, the CTC has several key limitations. This report offers proposals to strengthen the CTC by addressing these shortcomings and leveraging the credit as a tool to better invest in the next generation by:

  • Eliminating the minimum earnings requirement and making the credit fully refundable to ensure that it reaches all low- and moderate-income families with children.
  • Indexing the value of the credit to inflation so that it does not continue to lose value over time even as the costs of reaching or staying in the middle class are rising.
  • Enhancing the CTC with a supplemental Young Child Tax Credit of $125 per month for children under age 3. The Young Child Tax Credit would be made available to families on a monthly basis through direct deposit or the Direct Express card, in recognition of the fact that child-related costs do not wait until tax time.

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