Child Tax Credit Changes Would Protect Millions From Poverty

 The House Build Back Better legislation would ensure that families continue to receive a significantly expanded Child Tax Credit through monthly payments until 2022, and it would permanently make the full credit available to children in families with low or no earnings in a year, thereby locking in significant expected reductions in child poverty.

The extended credit helps about 9 out of 10 children throughout the nation, and preliminary results suggest that it is working. The great majority of low-income parents use their Child Tax Credit payments to meet basic requirements such as food, housing, utility bills, and education, which may help their children get a head start in life. See how much you get back in taxes for a child.

Build Back Better would also prolong the American Rescue Plan's increase of the Earned Income Tax Credit (EITC) for working adults without children until 2022, improving the earnings of nearly 17 million of these working people. Previously, approximately 5.8 million of them were taxed into or deeper into poverty, in part due to insufficient EITC.

Making the whole Child Tax Credit accessible to families with little or no wages in a year, sometimes known as making it "completely refundable," is predicted to result in historic reductions in child poverty compared to what would have occurred otherwise.

Prior to the Rescue Plan, which made the entire Child Tax Benefit completely accessible in 2021, 27 million children in low-income households got less than the full credit or no credit at all. Full refundability guarantees that children in low-income households get the same amount of the Child Tax Credit as children in higher-income families. This provision is the primary driver of the credit expansion's reductions in child poverty:

Overall, Build Back Better's Child Tax Credit changes — full refundability and increasing the maximum credit to $3,600 for children under the age of six and $3,000 for children aged six to seventeen — are expected to reduce child poverty by more than 40% compared to what it would be without the expansion. 87 percent of the anti-poverty effect is driven by full refundability.

While policymakers should work to make the larger credit permanent, even if credit levels revert to their pre-2021 level of $2,000 per kid under the age of 17, having the credit fully accessible at that level would cut child poverty by around 20%.

Build Back Better's Child Tax Credit expansions, particularly permanent full refundability, represent a significant step toward racial equity because they would permanently eliminate a fundamental design flaw in the credit that had the direct effect of ensuring that a disproportionate number of Black and Latino children received a partial credit or no credit at all. Prior to the Rescue Plan's extension, about half of our country's Black and Latino children got less than the full Child Tax Benefit or no credit at all, compared to around one in every five white children, since their families earned too little.

Due to past and continuing discrimination in education, housing, employment, and criminal justice that has systemically curtailed opportunity, Black and Latino families are overrepresented in low-wage labor and have inferior employment prospects. Build Back Better would also reinstate credit eligibility for children who are ineligible for a Social Security number due to immigration status but may be recognized as tax dependents by utilizing an Individual Tax Identification Number (ITIN). To learn more visit the child tax credit portal.