The House Republican tax bill increases the maximum child tax credit (CTC) to $1,600, from its current $1,000 per-child level. The proposal, however, excludes millions of children whose parents work in low-wage jobs — even as it expands eligibility for higher-income families. Since low-wage earning parents and their children are the people with the greatest need for the CTC, excluding them from the CTC expansion — especially while extending the CTC for the first time to many families with incomes between $150,000 and $300,000 — represents unsound policy.
Congress and President Clinton created the CTC in 1997; it has since been modified several times on a bipartisan basis. Currently, the maximum per-child credit is $1,000, and the credit is available only to parents who work and earn income within certain ranges. The CTC is partially refundable, meaning that it is partly, but not entirely, available to families with earnings too low to owe federal income tax. Specifically, the refundable portion of the CTC is limited to 15 percent of a family’s earnings over $3,000. At the upper end, the CTC begins to phase out (at a rate of 5 cents per additional dollar of income) for married couples making over $110,000. It phases out entirely for a married family with two children when the family’s income reaches $150,000.