This is a huge missed opportunity to help our working families.
First, the House proposal. It would increase the credit from $1,000 to $1,600. According to a new analysis from the Center on Budget and Policy Priorities, it would leave out or give only partial benefits to 46 percent of children in working families. About 20 percent, or 120,000 Arkansas children in working families, would be completely excluded from the change. Another 26 percent, or 153,000 Arkansas children in working families, would receive less than the full value of the $600 increase proposed in the credit under the House bill.
Currently, the Child Tax Credit is only “partially refundable,” which means that families with incomes too low to owe federal income tax only partially benefit from it. The refundable part of the credit is currently limited to 15 percent of a family’s income over $3,000 (no refundability for incomes less than $3,000). Because of the credit’s slow phase-in, families with two children do not receive the full $1,000 credit until their income reaches $16,333. The poorest children in working families qualify for only a small credit, or none at all.
The House proposal to increase the maximum would do nothing to make the credit more available for low-income working families (it still would be limited to 15 percent of earnings over $3,000). In other cases, low income families would receive just a partial bump up in the credit. However, the House proposal would increase the income level at which the credit phases out, thus making more higher income families eligible to take advantage of it. Under current tax law, a married couple with two children and income above $150,000 aren’t eligible for the Child Tax Credit. But in this proposal, couples with two kids who make between $150,000 and $294,000 would be eligible for the credit for the first time.
It’s not a bad idea to make more families eligible for the Child Tax Credit, but it is bad policy to fully extend it to higher-income people without making it available to more lower-income families at the same time.
* A single mother with two kids earning just $14,500 would be completely left under the House proposal and receive no increase in her credit.In short, the tax bill afflicts the afflicted and comforts the comfortable.
* A married couple with two kids earning $24,000 would only receive a $100 increase in the credit per child (a total increase of $200).
* A married couple with two kids earning $200,000 would be newly eligible and would now receive a $3,200 credit for the first time.