Clinton would make 2 important changes to the childcare tax credit
Hillary Clinton has proposed two important changes to the child tax credit (CTC). The first would phase in the credit starting with the first dollar of earnings, a change that would make very low-income workers eligible and increase assistance for workers with earnings too low to receive their full CTC.听 The second would double the credit for children under age 5 to $2,000 and accelerate the phase-in, insuring that even low-income families could benefit from the increase. These changes would reduce revenues by聽聽from 2016-2026.
Today鈥檚 CTC provides a credit of up to $1,000 for each child under age 17. The credit phases out at a rate of 5 percent of income over $75,000 for single parents or $110,000 for married couples. Workers who qualify for a credit that exceeds the tax they owe can receive part of the credit as a refund (known technically as the additional child tax credit鈥擜CTC鈥攐r the refundable CTC). Workers can receive a credit of 15 cents for every dollar they earn until they reach the $1,000 maximum. But that only starts after they鈥檝e made $3,000. As a result, about聽聽because their parents earn too little to get the full CTC.
By removing the $3,000 refundability threshold, Clinton鈥檚 plan would direct about $15 billion towards the poorest workers鈥攕omething I have聽聽in the past and that聽听补苍诲听聽have proposed in recent legislation. About 85 percent of the additional benefits would go to families in the lowest fifth of the income distribution and almost all of the rest would go to workers in the next fifth. The change would also simplify taxes by making the CTC consistent with other tax benefits that phase in with earnings, including the earned income tax credit (EITC).
The second piece of Clinton鈥檚 plan would also increase benefits for many low- and middle-income families with young children. Each child under age 5 would qualify for a $2,000 credit, double what they can receive now. The refundable credit would phase in at 45 cents per dollar of earnings, up from today鈥檚 15 cents. Thus even very low-income families could receive their full credit. For example, a family with one child (under age 5) currently has to earn $9,667 to get the full $1,000 credit. Under the proposal, that family would get a $2,000 credit once their earnings exceeds $4,445.听聽shows聽that the most effective and efficient investments in children are those made when they are very young, so even聽聽in income during these critical early years matter.
Members of both major political parties (including聽) have proposed increases to the CTC. And there are聽聽out there for improving the program. Perhaps one of them will find its way into bipartisan legislation next year.
This article first appeared in .听
