Recently, GOP Vice Presidential nominee JD Vance said on Face the Nation “We should expand the child tax credit… I’d love to see a child tax credit that’s $5,000 per child.” He further proposed that the expanded credit be extended to “all American families,” emphasizing disparities in the availability of the current child tax credit (CTC) based on family income. Sen. Vance was making a pro-family argument, but changes to the CTC also involve complicated tax and welfare policy considerations. Given the importance of this high-profile program, it is worth reviewing key features of the CTC and placing Sen. Vance’s comments in the context of the broader debate about adjusting it.

The CTC increased from $1,000 per child to the current $2,000 per child under the 2017 Tax Cut and Jobs Act (TCJA), offsetting the elimination of the personal exemption and changes to the standard deduction in the tax code. These expansions expire at the end of 2025, meaning that, unless Congress acts, the CTC will revert to $1,000 per child and the personal exemption and pre-TCJA standard deductions will return. This makes discussions over the CTC crucially important both during the current campaign and also throughout 2025 when Congress must consider legislation to address the CTC—along with dozens of other tax policies.

The debate over the CTC’s future is complicated by the temporary pandemic-era expansion that Democrats achieved and have since tried to make permanent. Legislation in 2021 turned the CTC into a fully refundable child allowance for one year, meaning parents received a flat amount whether they worked full-time, part-time, or not at all—and regardless of any federal income tax liability. The only differences in payments were based on age, with children under six qualifying for $3,600 per year and those six and older receiving $3,000, with the expanded amount phasing out above certain income levels ($150,000 for married couples and $75,000 for single individuals).

Half of the new CTC was distributed in monthly checks during the last six months of 2021, with the remaining balance sent as a tax refund in early 2022. Although these changes failed to become permanent, Democrats have continued to call for their revival, most recently in Vice President Harris’s proposed economic agenda released in August 2024. She proposed to revive the 2021 CTC policy, while in addition calling for a $6,000 credit in a child’s first year. Likely, this reflects a starting point for Democrats in coming negotiations over reauthorizing the CTC expansion included in the 2017 TCJA. 

The 2017 and 2021 expansions serve as the backdrop to Sen. Vance’s recent comments. Many of the details of what Sen. Vance (and the Trump campaign, which may not be the same) supports remain unclear. For example, an increase in the CTC to $5,000 offered to all families would be a major, and costly, departure from current policy. But that glosses over key details, such as what Sen. Vance meant by “all families,” which would affect the CTC’s crucial work requirement and work incentive features. If the work requirement or work incentive phase-in of the benefit were eliminated, it would move the CTC substantially further away from the program’s tax relief intent. It would also be hugely expensive, adding more federal spending to an already robust system of government support for low-income families.  

To understand this point, it is important to reflect on the original and ongoing justification for the CTC. The CTC was created in 1997 as tax relief for parents, and only since 2001 and later expansions has part of the benefit been available to families without federal income tax liability. Even then, the portion available to families without tax liability was less than the tax relief afforded to those with tax liability. This continued focus on tax relief under the CTC is partly due to the fact that other safety net programs like the earned income tax credit (EITC) offer support to low-income families who earn too little to owe income taxes, while food stamps and other programs aid those who do not work at all.

How do Senator Vance’s comments fit in this context? 

Sen. Vance spoke in generalities, so many details of his proposal remain unclear. Perhaps that was intentional, either because he sought to leave negotiating room, or he was reflecting his own personal pro-family views and not necessarily the broader position of the Trump campaign. Still, he offered sufficient direction to merit some specific reactions, including on how Republicans especially should respond to his proposal. 

First, he suggested that “you want (the CTC) to apply to all American families” without “this massive cut off for lower income families, which you have right now.” At a minimum, that suggests removing the current $2,500 earnings requirement for claiming the CTC, and beginning its phase in with the first dollar of earnings. Doing so would further remove the CTC from its original tax relief intent, since more payments would flow to families without federal income tax liabilities. That also would duplicate benefits already provided under existing programs for the lowest-income families such as the EITC and food stamps, adding expenditures on top of those already large federal programs.  

To illustrate this point, let’s consider a hypothetical single mother with two kids working part-year or part-time (and for purposes of our example earning $16,000 per year). If we assume a continued work requirement but a far more generous phase in among other changes, Sen. Vance’s proposal to increase the CTC per child to $5,000, coupled with an expansion in refundability, could mean that our single mother would receive $10,000 in the CTC, plus another $6,960 in the current EITC and $7,200 in food stamp benefits. That’s far more in combined benefits ($24,160) than the equivalent tax relief (also $10,000 from the increased CTC) that would be provided to a middle-income family whose earnings make them ineligible for EITC and food stamp benefits. And that’s without considering the myriad other programs our low-income single mother might also receive, such as Medicaid, school lunch, WIC, childcare assistance, and housing assistance.

The availability of such large sums of government assistance at very low earnings levels gives rise to concerns about work disincentives, especially if the phase-in rate of the current CTC is significantly increased—as would have to be the case in our example. Those concerns are amplified by the phase-out of programs like the EITC and food stamps at higher income levels, meaning that adding more assistance through a larger CTC might discourage additional employment.

As a Federal Reserve Bank of Atlanta report described last year, the combined weight of multiple benefit programs can already significantly tilt the scales toward benefit collection instead of work. In Washington, DC, for example, due to the many benefits provided at low earnings and fewer benefits and higher taxes paid by those who work and earn more, a hypothetical single mother of two children had the same total income whether she earned $11,000 or $65,000 through work. A $5,000 per child CTC on top of existing benefits would further encourage benefit collection over work.  

Second, Sen. Vance’s suggestion that “all Americans families” should be eligible for the CTC raises the specter that he might intend to remove the current earnings requirement for claiming the credit altogether, since that requirement disqualifies non-workers from claiming the credit. However, any openness to removing the earnings requirement should be off the table. Removing the earnings requirement would eliminate any remaining connection between the CTC and employment, substantially diminish the tax relief part of the CTC, and constitute the revival of federal welfare checks for nonworking parents. Advocates for removing the earnings requirement argue that the CTC currently leaves out the most vulnerable Americans–those without earnings. But that ignores the existing safety net programs for which they are already eligible, as we highlighted above.    

Removing the earnings requirement for the CTC would be a major departure for Republicans. When Democrats created their temporary 2021 expansion that eliminated the CTC’s work requirement, no Republicans supported that legislation, and many pointed to the elimination of the earnings requirement as the reason for their opposition. Sen. Joe Manchin (then D-WV) shared that view, and ultimately blocked administration efforts to make the no-work CTC expansion permanent. Senate Republicans also recently blocked another effort to expand the CTC by paying it for years in which parents do not work.

Opponents of eliminating the CTC’s work requirement also note that a fully refundable CTC would create a large new benefit for non-workers, on top of existing benefits such as food stamps, Medicaid, and others, which would further discourage employment among the lowest income Americans. It is conceivable that Sen. Vance favors sending the same $5,000 CTC to all working families regardless of income, starting with the first dollar of earnings. However, eliminating the current 15 percent phase-in or substantially increasing the phase-in rate would also have negative effects on employment, and invite significant gaming (such as by misreporting income) to unlock benefits. 

Finally, depending on many of these policy details, the cost of Sen. Vance’s proposal could be substantial. That raises questions over how such an expansion could be paid for. Depending on specific features of the proposed policy, the total cost could exceed $2 trillion over just the first decade, on top of the $4 trillion CBO projects the federal government will already spend on income security programs. That would be far more expensive than even the permanent extension of Democrats’ temporary 2021 policy, which the Joint Committee on Taxation estimated as costing $1.3 trillion over 10 years.

In the end, as Sen. Vance noted, any administration has to work with Congress on what is possible. That depends not only on who is in Congress and the White House, but also on underlying tax and budget dynamics. Many of the temporary tax policies in the 2017 TCJA will be up for grabs next year — including the doubling of the CTC to its current $2,000 per child level. Extending just that policy contributes to the $4 trillion cost of extending that law, as former President Trump has pledged to do. And Congress must in turn weigh such costs in the context of the current $35 trillion debt, compounded by annual interest payments now approaching $1 trillion.  

Expanding the CTC may make for a good pro-family argument, and strong campaign rhetoric. But the details behind such proposals involve much broader considerations, including hard-fought tax and welfare policy details and potentially great costs in a time of already rapidly growing debt. Thus the real message for parents may be this: Don’t start making plans for spending your promised $5,000 per child CTC just yet.