Hillary Clinton’s Child Tax Credit Proposal Would Offer a Lifeline to America’s Poorest Families
October 17, 2016Print
By Tyler Bishop
Until last week, the 2016 presidential election was devoid of any serious debate about tax credit policies for workers and their families. But that changed when Democratic presidential nominee Hillary Clinton issued a major proposal less than a month before Election Day to reshape the Child Tax Credit (CTC).
The Center on Budget and Policy Priorities (CBPP) estimates that her plan would lift 1.5 million people above the poverty line and inch another 9.4 million closer to the line. The proposal, which includes three key provisions, would:
- Phase the credit in with the first dollar that families earn
- Double the maximum credit for children under five from $1,000 to $2,000
- Phase the credit in at a rate of 45 cents per dollar (up from 15 cents currently) for children under five.
The first provision scraps the CTC’s current condition that a parent must earn at least $3,000 before they are eligible to claim a credit. That means America’s lowest-income parents who currently get nothing from the CTC would start receiving a tax refund to cover childcare expenses on every dollar they earn. Under the new plan, the size of those refunds would also increase significantly.
The CTC is currently capped at $1,000 per child, which means that parents can receive 15 cents back for every dollar they earn above $3,000 up to a maximum benefit of $1,000. But with the plan’s second provision, which doubles that cap for children under five, parents would get back a much bigger portion of their tax payments every year. The idea is to support families who are struggling to afford the rising costs of early childhood care and education. The third provision is also aimed at parents of babies, toddlers and preschoolers. It would allow parents to claim a refund of 45 cents per dollar earned while their child is under five years old—up to the new $2,000 limit. Clinton’s proposal also promises to “expand refundable relief for low-income workers without children,” which may be a hint at expanding the Earned Income Tax Credit (EITC) for workers not raising children.
Like most proposals to alter the tax code, the technical details of the plan are complicated. But when you cut through the weeds, the on-the-ground benefits for struggling parents and families could be substantial. CBPP takes a look through the lens of a hypothetical low-income single mom:
A single mother working 20 hours a week, 50 weeks a year, at the federal minimum wage while raising a toddler and a seven-year-old daughter currently receives a partial CTC of $638. Under this proposal, she would get the full $3,000 credit for a family with two children of these ages: $2,000 for the toddler and $1,000 for the older child.
Over the last two decades, the number of people living in extreme poverty has grown in the United States. In fact, from 1996 to 2011, Americans living on less than $2 per day doubled. Throughout the 2016 campaign, Hillary Clinton has promised to target these Americans with policies that make daily life more affordable. Her CTC proposal represents one step toward achieving that goal.
Republican presidential candidate Donald Trump has not announced his plans for the CTC, but has said he would increase child care benefits for middle income families “through the existing Earned Income Tax Credit (EITC).”