Proposed Changes to Child Tax Credit Will Hurt Poor Children and Families for Years to Come

Jul 23, 2014

By Randi Hall

UPDATE: On July 25, 2014, the House of Representatives debated on H.R. 4935 and passed the bill with a vote of 237 to 173. The Senate is unlikely to take up the bill but its passage in the House shows that there’s much more to be done to protect low-income families and ensure their access to supports. CLASP will continue to monitor and advocate for policies that support low-income families, such as a permanent extension of the 2009 improvements to the CTC and EITC.

This week the House of Representatives is set to consider the Child Tax Credit Improvement Act of 2014 (H.R. 4935). Sponsored by Congresswoman Lynn Jenkins (R-KS), the bill would permanently expand eligibility of the Child Tax Credit (CTC) to higher income families, but would not extend improvements made in 2009 that benefit working poor families.  At the same time, the act would institute taxpayer identification requirements needed to claim portions of the credit, restricting access for millions of citizen children. These proposed changes to the CTC are regressive and largely disregard the needs of low-income families and the children this credit supports.

Specifically, the Child Tax Credit Improvement Act would:

  • Institute new phase-out amounts of $150,000 for married couples filing joint returns and $75,000 for all other taxpayers, changing the current category limits of $110,000 for joint returns and $55,000 for married individuals filing separate returns. The $75,000 limit set for individual taxpayers would be indexed to inflation and the joint return limit would be two times this adjusted amount.
  • Index the maximum CTC amount to inflation, protecting the value of the credit over time.
  • Fail to make permanent the improvements to the CTC that were first passed in 2009 under the American Recovery and Reinvestment Act (ARRA) which made more working-poor families eligible for the credit  and increased the amounts that some low income families may receive. These improvements are currently scheduled to expire in 2017.
  • Require a parent to file taxes with a Social Security Number (SSN) in order to claim the refundable portion of the CTC for their qualifying children. This means that parents who file with an IRS-issued Individual Tax Identification Number (ITIN), the majority of whom are immigrant workers, would be prevented from accessing the full CTC for their children. According to the National Immigration Law Center, it is estimated that up to 4.5 million U.S. citizen children from low-income families would be denied access to the CTC through the provisions in this bill.

H.R. 4935 would extend eligibility of the CTC to over 3 million additional beneficiaries with higher incomes, while making no effort to extend improvements to beneficiaries on the lower end of the income scale. For example, couples with two children making between $150,000 and $205,000 would become newly eligible for maximum amount of the CTC through this bill, while if the 2009 ARRA improvements are allowed to expire in 2017, a single mother with two children who works full time at minimum wage earning $14,500 would lose $1,725 in 2018. In 2011, over 50% of families receiving the refundable CTC earned less than $25,000.

The Child Tax Credit was created to recognize the additional costs that parents incur. It is wrong to deny this credit to those working poor families who struggle the most to meet their families’ basic needs. The CTC, in combination with the Earned Income Tax Credit, kept an estimated 10.1 million people, including 5.3 million children, out of poverty in 2012. Congress’ first priority in improving the CTC should be to make permanent the 2009 changes that allow children in working-poor families to benefit from this key credit. 

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