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On July 25 the House of Representatives approved a Republican bill that would expand the child tax credit for better off families while doing nothing to extend or make permanent a 2009 provision that expands the credit to the working poor. President Obama has proposed to make permanent the 2009 provision before its scheduled expiration date at the end of 2017, which Congressional Republicans have refused to do.
Figures published by Citizens for Tax Justice illustrate how nationally and in each state, making permanent Obama’s provision would mostly help those families making under $40,000 in 2018, while the Republican bill (H.R. 4935) would mostly help those making over $100,000.
The child tax credit (CTC) provides a maximum tax break of $1,000 times however many children under age 17 a family has. If the family’s income is so low that this amount ($1,000 times the number of children under age 17) exceeds their entire income tax liability, they can receive a refundable credit, which means they actually receive money from the IRS.
The refundable part of the CTC is limited to 15 percent of their earnings above a certain threshold. (The total CTC including the refundable portion cannot exceed $1,000 per child.) That earnings threshold was lowered to $3,000 by the 2009 provision enacted under President Obama. If the 2009 provision expires as scheduled at the end of 2017, the earnings threshold will rise to $14,750, which means it will be much more difficult for very low-income working parents to claim the full credit.
While House Republicans would allow that provision to expire, their bill, H.R. 4935, would expand the CTC in ways that benefit better off families. It would index the $1,000 credit amount for inflation, which would help only those families with enough earnings to receive the full credit even with the higher earnings threshold. The Republican bill would also increase the income level at which the CTC starts to phase out from $110,000 to $150,000 for married couples. Finally, that $150,000 level for married couples and the existing $75,000 income level for single parents would both be indexed for inflation thereafter.
Given that both proposals are projected to cost around $11 billion each year that they are in effect, the House Republican proposal has the effect of shifting money that is going to low-income working families towards better off families.