Policy Brief: On the tax liability red herring currently influencing Congressional debates on the child tax credit

As the tax package talks continue to move slowly through Congress, Senate Finance Committee Ranking Member Crapo recently released a statement where he objected that “more than 90 percent of the bill’s CTC benefits accrue to taxpayers who will not owe a single dollar of federal income tax.” Jack Landry’s new report brings a lot of data to contextualize this criticism.

Key Takeaways

  • Parents will not owe federal income taxes until they earn over $43,000—in most cases, far higher amounts. Insisting CTC improvements go to families who have federal tax liability would ensure benefits do not reach most low-income families.
  • Senator Crapo has suggested that the CTC provisions go more to the working poor rather than families without tax liability, but I estimate 98 percent of children living in poverty have parents who do not owe federal income taxes.
  • While most of the CTC changes benefit low-income families, the business tax provisions also included in the legislation benefit more middle-income families. According to the Urban-Brookings Tax Policy Center’s modeling, the legislation as a whole provides more benefits to the 20–80th income percentiles than the 0–20th percentile. 

Read the full report.

From the series:
Policy Microsimulations