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ICYMI – Op-Ed: The New Expansion of the Child Tax Credit Maintains Strong Work Incentives

February 8, 2024 — Press Releases   

WASHINGTON, D.C. – Reforms to the Child Tax Credit (CTC) included in the House-passed Tax Relief for American Families and Workers Act ensure that families who claim the credit stay connected to work, writes George Callas, former chief tax counsel of the House Ways and Means Committee, in an op-ed with The Hill.

Child Tax Credit reforms incentivize work, not the other way around:

“Some conservative organizations in Washington have expressed concern that such a significant societal change for children and families comes with a price — a disincentive for parents to work. But if anything, the tax package is designed to ensure a proper and continued connection between the child tax credit and employment.

“…According to a recent report by the Bipartisan Policy Center, the legislation’s child tax credit improvements — refundability of the full amount, increasing the earnings phase-in for larger families, the one-year look-back and indexing the credit to inflation — should not have significant impacts on work, employment or inflation.”

CTC reforms increase work incentives as earnings rise:

“First, it eliminates the separate cap that prevents low-income families from claiming the full $2,000 per-child credit if they lack sufficient income-tax liability. (That limit was $1,700 per child in 2023.) In theory, repealing the separate cap could even increase work incentives by allowing affected families to continue receiving additional credit as their earnings rise, while also giving those families greater resources.”

Expanding the CTC for families with multiple children is “pro-work” policy:  

“Larger families require greater resources to escape poverty, so differentiating the earnings requirements based on family size targets benefits efficiently. In addition, receiving an extra 30 or 45 cents per dollar earned is a stronger work incentive than receiving only 15 cents, making this provision pro-work as well.”

“Look-back” provision has no impact on work incentives:

“…concerns that the look-back provision will discourage work are unwarranted. To take advantage of this, a person would have to work one year on, one year off. This means parents who want to game the provision would have to decide to quit their jobs in, say, January 2024, in anticipation of a credit they would receive when they file their taxes 15 months later (and which they would still receive if they continued working). Ryan Ellis of the Center for a Free Economy notes that for low-income families living paycheck to paycheck, leaving the workforce for a year and then returning the following year because they will receive a couple thousand dollars more than a year later doesn’t make any sense.”

Read the op-ed here