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Child Tax Credit Reforms in Tax Relief for American Families and Workers Act Are Proven, Conservative, Pro-Family Policy

January 22, 2024

WASHINGTON, D.C. – Evidence shows the reforms to the child tax credit included in the Ways and Means Committee-passed Tax Relief for American Families and Workers Act are sound, pro-growth economic policies that will encourage more Americans to work, not the other way around.

Ways and Means Committee Chairman Jason Smith (MO-08) said, “Millions of hardworking American families have benefited from the Child Tax Credit since Republicans created the tax break in 1997, and millions more have reaped the benefits of the Republican expansion of the credit during the Trump Administration. The Tax Relief for American Families and Workers Act builds on this success by responsibly expanding this tax relief, with a proven track record of success, to more families and those with multiple children.

“The American people have been struggling for years with historic inflation, and it is time for Congress to deliver commonsense bipartisan solutions to ease their suffering. The Child Tax Credit is a simple, straight-forward solution to put more of their hard-earned money back in their pockets.” 

The Tax Relief for American Families and Works Act enhances the Child Tax Credit by: 

  • Delivering inflation relief: adjusts the tax credit for inflation starting in 2024.
  • Eliminating penalty for larger families: ensures the child tax credit phase-in applies fairly to families with multiple children.
  • One-year income lookback: provides flexibility for taxpayers to use either current- or prior-year income to calculate the child tax credit in 2024 or 2025, mirroring bipartisan action taken six times in the past 15 years.
  • Expanding access to the credit: incrementally increases the refundable portion of the child tax credit for 2023, 2024, and 2025.

Critics of expanding the Child Tax Credit have relied on misguided data and flawed methodology to argue it will have a negative impact on labor force participation. However, that could not be farther from the truth. The 2017 Tax Cuts and Jobs Act (TCJA) doubled the credit, increased the refundable portion to $1,400, and adjusted the refundable portion of the credit for inflation, while keeping in place work requirements to claim the credit. In the years following passage of TCJA, there was no drop in labor force participation rates.

The expansion included in the Tax Relief for American Families and Workers Act closely emulates the successful expansion in TCJA and goes one step further by removing the penalty for families with multiple children and making more of a taxpayer’s income eligible for the credit, encouraging more hours worked and larger family growth. This commonsense expansion of the CTC maintains vital guardrails to incentivize work and will provide families struggling with historic inflation much-needed relief. 

Independent analysis conducted by the American Enterprise Institute and the Tax Foundation have both confirmed there is little-to-no risk of negative labor force participation effects from the expanded Child Tax Credit included in the Tax Relief for American Families and Workers Act – with the Tax Foundation writing in part:

“The proposed expansion of the child tax credit is much narrower than the 2021 expansion that some lawmakers have wanted to bring back. That expansion significantly increased the maximum credit and removed the phase-in, severing the credit’s tie to work and offsetting tax liability. While the amount of credit people can receive above their tax liability would increase, the proposed design generally preserves the credit’s work incentives. In some cases, the design strengthens them by phasing the credit in faster.”

READ: With Bipartisan Vote, Ways and Means Committee Approves Pro-Growth Tax Relief Package to Help Small Businesses, Promote American Competitiveness, and Support Working Families