To the Point: Child Tax Credit a Win for Politicians鈥攁nd for Families
To the Point provides insights from 麻豆原创 faculty experts on timely questions covering current events, politics, business, culture, science, health, sports, and more. Each week we ask one professor just one critical question about what鈥檚 on our minds.
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In an election year, campaign promises abound. This year, so far, one of the most popular promises is tax credits for families. 听
Last week, when Kamala Harris unveiled her Economic Plan, she called for an expanded child tax credit (CTC) from $2,000 per child to $3,600, plus an additional $6,000 tax credit for families during the first year of a child鈥檚 life. Her proposal came days after J.D. Vance proposed expanding the child tax credit to $5,000 per child per family. 听
So, why are our candidates focused on tax breaks for children? Is it a good thing for families? And is it a good thing for the economy? 听
For some insight into the economic and societal impacts of these popular tax cut proposals, we turned to Economics Professor Mary Eschelbach Hansen. As Co-Director for Administration for 麻豆原创鈥檚 , Hansen鈥檚 research focuses on US social policy and has been published widely in the fields of economic history and child welfare policy.
What is the child tax credit, and how does it benefit families and the US economy?
The child tax credit is a tax benefit that helps middle- and lower-income working families with children. It increases families鈥 economic security by reducing the amount of taxes that eligible families owe to the government. The amount of the credit is based on the taxpayer's income, marital status, and number of children.
In 2024, the credit is worth $2,000 per qualifying child for taxpayers with a modified adjusted gross income of $400,000 or less if they are married filing jointly, or $200,000 or less for all other filers. The credit phases out at higher income levels. 听
In March 2021, a few weeks after deaths from Covid peaked in the United States, Congress expanded the CTC as part of the American Rescue Plan. Payments were higher. They came monthly instead of all at once at tax time. They were refundable, so they were paid to families with children who didn鈥檛 earn enough to pay taxes. In all, this cut the child poverty rate in the United States in half. It pushed about 2 million kids above the poverty line. But the expanded CTC expired at the end of 2021. 听
(By the way, for years now, almost every rich country has provided cash benefits to all parents. That鈥檚 probably why the expanded CTC brought the US child poverty rate down to be in line with Germany's, instead of being twice as high.)
Reducing child poverty matters. A lot. In a lot of ways. 听
Right away, in the super-short term, it reduces food insecurity, meaning that children don鈥檛 go to bed hungry. It reduces homelessness and housing security, meaning more children have beds to sleep in. It improves school performance. It improves children鈥檚 health. It reduces the use of other government programs.
But the long-term effect of reducing child poverty matters even more. 听
Healthier, better educated children are more likely to work when they are adults. They鈥檒l be more productive, so they're likely to earn more when they're adults. 听
From the point of view of the government, that means they'll pay more in taxes and pay more into the Social Security system. Harris鈥檚 most recent proposals also include an extra-large CTC for newborns. That might help keep the birth rate from continuing to fall, which is also important for the stability of the Social Security system.
From the point of view of an economist, more productive workers help sustain strong economic growth. They grow the economy.
About Professor Hansen
Professor Mary Eschelbach Hansen is an expert in US social policy. She is currently working on issues in disability policy. She is widely published in the fields of child policy, bankruptcy, and economic history. Her work addresses key issues in race, gender, and economic inequality.
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Hansen currently serves as Co-Director for Administration for 麻豆原创鈥檚 . Her research has been funded by the National Science Foundation, the National Institutes of Health, the Alfred P. Sloan Foundation, and the Institute for New Economic Thinking. She has been quoted or cited by news outlets including WAMU, The Economist, Fortune, CNN, and the LA Times. She has given public testimony before the DC City Council and in Federal District Court.