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Testimony: Correcting the Record on the Effects of Replacing the Child Tax Credit with a Child Allowance

July 17, 2023

Chairman Bennet, Ranking Member Thune, and distinguished members of the Subcommittee on
Taxation and IRS Oversight, thank you for the opportunity to testify on the Child Tax Credit
(CTC). My name is Kevin Corinth, and I am a Senior Fellow and the Deputy Director of the
Center on Opportunity and Social Mobility at the American Enterprise Institute. This testimony
reflects my own personal views and does not represent those of the American Enterprise
Institute, which has no institutional views.

The CTC—the version that we have today—should be celebrated as a bipartisan achievement
because it serves the dual purposes of providing tax relief for families and encouraging work.
Since it was introduced in 1997, the CTC has become more generous and expanded to more
working families, including to those who do not earn enough to pay federal income tax. Research
shows that tax credits that incentivize work are successful not only in increasing employment but
also in improving the long run outcomes of children.

However, for six months during 2021, the CTC was replaced with something completely
different. Congress turned the CTC, provided to working families, into a child allowance
provided to all families regardless of their work effort. This reform cost an additional $100
billion annually, likely contributing to the high inflation we have experienced for the past two
years. If made permanent, it would lead an estimated 1.5 million parents to exit the workforce. It
would also put at risk the other benefits of tax credits that encourage work, including promoting
the long-term wellbeing of children.

Read the full testimony here.