Biden’s Child Tax Credit Proposal Would Help Lowest Income Families

By Ashley Burnside 

Among the provisions in President-Elect Biden’s American Rescue Plan to provide COVID-19 relief is an expanded version of the Child Tax Credit (CTC). Most notably, it would address a long-standing inequity in the CTC–the program’s partial refundability, which makes it fail to help the families with the lowest incomes who most need the CTC. An estimated 27 million children aren’t receiving the full CTC benefit because their families don’t make enough income. The Biden proposal would temporarily make the CTC fully refundable, making it accessible to the families with the lowest incomes. Biden also proposes increasing the credit from $2,000 per child to $3,600 per child under 6 and $3,000 per child 6-17, recognizing the increased cost of raising a young child.  

These CTC expansions would promote racial equity and reduce child poverty among children of color. Under these temporary changes, families with no income could claim the CTC because it would be fully refundable. This would help parents afford necessities for their kids like rent, school supplies, internet, and food. This and the increase in the CTC benefits are estimated to reduce poverty among Black children by half and among Latinx children by over 41 percent. 

When families have increased income during a child’s early development, research shows there are positive health and education outcomes for the child. Biden’s plan also includes provisions to expand the Earned Income Tax Credit (EITC) for workers without dependent children. Previously, workers without dependent children were only eligible for a very small EITC benefit and were being taxed deeper into poverty as a result. This temporary EITC increase would support many of the frontline workers who have helped keep our economy running during the public health crisis. Young adults, especially young adults of color who faced high rates of poverty even before the COVID-19 crisis, would also benefit from this EITC increase.  

Congress should pass this proposal into law, and policymakers should also undo a harm caused by the Tax Cuts and Jobs Act of 2017. Under this provision, only children with a Social Security number are eligible for the CTC, leaving out an estimated 1 million children who would otherwise be eligible for the credit. When Congress enacts this proposal, it should also fix this gap in coverage and allow children with Individual Tax Identification Numbers (ITINs) to be eligible for the CTC and the stimulus payments.

Finally, lawmakers should ensure that parents can claim the expanded CTC as an advance payment.  Families’ typical expenses, such as rent, mortgages, car payments and utilities, are due monthly. If Congress allows families to receive their CTC as a monthly advance payment rather than as an annual lump-sum tax credit, families would be able to budget and meet their expenses throughout the year rather than accruing debt.  

The Treasury Department should carefully implement the advance payments to reflect lessons learned from the first round of stimulus payments, which an estimated 12 million people faced barriers in accessing. People who don’t traditionally file taxes, don’t have bank accounts, and don’t have internet access all faced difficulties in getting their stimulus payments. The Treasury Department should conduct outreach to eligible families explaining how to claim the expanded CTC and providing options for applying over the phone. The IRS should make the process of filing for the CTC as simple as possible for parents who don’t traditionally file taxes.   

Biden’s proposed CTC expansion will help families afford necessities during a time of unprecedented financial hardship. This is critical since food insecurity rates among families with children have tripled during the COVID-19 public health crisis. We encourage lawmakers to pass these CTC and EITC expansions and to make them both permanent after the public health crisis ends.