Problem
The earned income tax credit (EITC) disincentivizes marriage for many working families, and making the child tax credit (CTC) fully refundable (as it was during the pandemic) discourages work and marriage in favor of government dependence and single parenthood. Some policymakers have advocated making the CTC fully refundable again to reduce point-in-time child poverty. But Congress originally intended the CTC as a source of tax relief for working families with children, while the EITC’s role was to address poverty and low income. A fully refundable CTC would weaken the work incentives built into both credits.
Solution
Consolidate the EITC, CTC, and head-of-household tax filing status into a working family credit (WFC). The WFC would retain the work incentives of a phase-in and phaseout and be designed to reduce the EITC’s marriage penalties. The WFC would maintain current levels of aid to most single-parent families while better incentivizing work and marriage. A key component of our plan is to rapidly phase in the WFC after the first dollar earned—which would reward parents when they work.
Date of Proposal : May 23, 2022
Angela Rachidi, A Simpler Safety Net for Families: Consolidating Child Tax Credits into a Working Family Credit, American Enterprise Institute, May 23, 2022, Read more.
Angela Rachidi et al., “A Safety Net for the Future: Overcoming the Root Causes of Poverty,” in American Renewal: A Conservative Plan to Strengthen the Social Contract and Save the Country’s Finances, ed. Paul Ryan and Angela Rachidi (American Enterprise Institute, 2022), Read more.
Angela Rachidi and Matt Weidinger, “A Federal Safety Net to Build a Better Future for Low-Income Children,” in Doing Right by Kids: Leveraging Social Capital and Innovation to Increase Opportunity, ed. Scott Winship et al. (AEI Press, 2024), Read more.
Angela Rachidi et al., “A Working Family Credit That Could Fundamentally Alter Child Poverty,” AEIdeas, December 13, 2022, Read more.