Problem
Many policymakers and advocates have called for making the child tax credit (CTC) fully refundable. That is, they would give the same per-child amount to all but the richest parents regardless of whether the family had any earnings. While this reform would increase income for the poorest families, reducing point-in-time poverty, it would discourage work and marriage, potentially hurting intergenerational upward mobility. Research suggests that up to 1.5 million working parents would leave the labor force in response to such a policy, reversing much of the progress in encouraging work achieved by welfare reform. The reduced earnings would also partly counteract the impact on poverty of providing the credit. Finally, sending checks to nonworking parents misses an opportunity to connect them with social services that could help them achieve independence.
Solution
Policymakers should reject calls for a fully refundable CTC or child allowance. The CTC should retain its phase-in, which incentivizes additional work until parents earn enough to be eligible for the maximum CTC amount.
Date of Proposal : March 5, 2021
Scott Winship, The Conservative Case Against Child Allowances, American Enterprise Institute, March 5, 2021, Read more.
Kevin Corinth, “Let’s Not Turn the Child Tax Credit into Welfare,” The Dispatch, January 29, 2024, Read more.
Angela Rachidi, “Why a Fully Refundable CTC Is the Wrong Policy for Working Families,” Institute for Family Studies, January 27, 2021, Read more.
Angela Rachidi, “The Child Tax Credit: 25 Years Later,” testimony before the US Senate Committee on Finance, Subcommittee on Taxation and IRS Oversight,” July 13, 2023, Read more.
Matt Weidinger, “‘Child Allowances’ Revive Welfare as We Knew It,” AEIdeas, February 5, 2021, Read more.
Robert Doar, “‘Free’ Money Can Make Life Worse,” The Wall Street Journal, June 22, 2021, Read more.
Bruce D. Meyer, “Testimony on Anti-Poverty and Family Support Provisions in the Tax Code,” testimony before the US Senate Committee on Finance, June 15, 2023, Read more.
Matt Weidinger, “Will Tens of Millions of New Monthly Benefit Checks Be Joe Biden’s Legacy?,” National Review, September 22, 2021, Read more.
Matt Weidinger, “Turning Back the Clock on Welfare Reform,” AEIdeas, August 23, 2021, Read more.
Robert Doar, “You’re Right, Senator Manchin: There Are No Work Requirements in Biden’s New Safety Net,” AEIdeas, September 15, 2021, Read more.
Robert Doar and Matt Weidinger, “Democrats’ Stealth Plan to Enact Universal Basic Income,” The Wall Street Journal, March 2, 2021, Read more.
Matt Weidinger and Angela Rachidi, “CTC Expansion Rooted in Desire to Roll Back Work-Based Welfare,” COSM Commentary, February 8, 2024, Read more.
Scott Winship et al., “Should Conservatives Favor Child Allowances?,” American Enterprise Institute, March 2, 2021, Read more.