The tax legislation passed yesterday by the Senate contains a piece of good news for low-income children and families. The measure would provide help for the families of 13 million low-income children by making the Child Tax Credit newly available to the families of 3 million children, and increasing the amount of credit available to the families of 10 million more.
The House has already passed a similar expansion of the Child Tax Credit. Whether this important improvement survives the negotiation of a final bill, however, remains to be seen.
The child tax credit helps families with the costs of caring for children. It provides additional funds that can help families cope with the rising costs of maintaining a household and raising children. Yet because of the way the credit is now structured, moderate and higher income families are able to take advantage of it, but many low-income families do not get the credit at all or are denied its full benefits.
Under current law, the child tax credit allows families to claim up to $1,000 for each child, reducing the amount owed in taxes. But families earning less than $12,500 do not get any credit at all, and, because the credit is only partially refundable, many low-income working families above that threshold get only a very small credit. The children of minimum-wage workers, and of many hard-pressed parents making considerably more than the minimum wage, get only a small portion of the credit.
In its report, The Center for American Progress Task Force on Poverty calls for making the child tax credit fully available for all children, also a goal of the Half in Ten antipoverty campaign. In a study of the impact of the Task Force proposals, the Urban Institute found that the single step of making the child tax credit fully refundable would reduce the number of Americans living below the poverty line by 3.3 million, or approximately 8 percent. If Congress includes the tax credit expansion in the final tax legislation it will be an important step toward this goal.