From the series:
Low-Income Families with Children and The Reconciliation Debate
Low-Income Families with Children and The Reconciliation Debate
Without Improvements to Refundability, any Child Tax Credit Expansion Cannot Benefit Low-Income Working Families
"Refundability is the key mechanism for a CTC expansion to benefit low-income working families." Download PDF ›
The second part in a series on Congressional reconciliation debates and policies benefitting low-income children, this analysis examines the effects of refundability — that is, tax credits that provide a benefit to people whose incomes are too low to owe any federal taxes at the end of the year.
Summary:
- Expansions to the non-refundable part of the CTC typically require families to have at least $36,000 of earnings to see any increased benefit. Refundability is the key mechanism for a CTC expansion to benefit low-income working families.
- Families receiving the refundable part of the CTC only “don’t pay taxes” if you ignore two-thirds of the tax system. Low-income families pay almost 30 percent of their income to payroll taxes and state and local taxes.
- Most experiences of poverty are temporary, rather than chronic. Almost 95 percent of beneficiaries of the EITC and refundable part of the CTC paid more in federal income and payroll taxes between 2008 and 2018 than they received in benefits from those credits.