Skip to main content

These Two Charts Show How the GOP's Proposed Tweaks to the Child Tax Credit Fail to Help Low-Income Americans

Senator Marco Rubio says he'll vote against any tax reform plan that doesn't include big changes to the Child Tax Credit. The data shows his concerns are valid.
Senator Marco Rubio.

Senator Marco Rubio.

Earlier today, Senator Marco Rubio (R-Florida) confirmed that he will vote against tax reform legislation unless it includes a significant increase in the refundability of the Child Tax Credit. "I think my requests have been pretty reasonable and consistent and direct. Right now the refundability level is $1,100, it needs to be higher," Rubio told the New York Times. "It's a pretty straightforward ask. If the refundable portion of the child credit is substantially increased beyond the $1,100 it currently is, I'll vote for the bill. If it's not, I won't."

Rubio has been advocating for such a change for some time. Along with Senator Mike Lee (R-Utah), Rubio proposed an amendment to the bill the Senate passed earlier this month that would have set the corporate tax rate at 20.94 percent in order to fund the expansion. It failed on the floor of the Senate amid opposition from Democrats, who viewed it as insufficient, and Republicans, who argued the slightly higher corporate tax rate would reduce the bill's pro-growth effects. In recent days, however, House and Senate negotiators have reportedly considered raising the corporate tax rate to 21 percent in order to fund a lower marginal tax rate for top earners.

The Child Tax Credit is one of those government transfer programs that most everyone loves: Democrats, because it's well-targeted to the low-income families who need it the most; Republicans, because it's pro-work and pro-family; wonks, because the available evidence suggests the credit pretty significantly improves long-term outcomes for low-income families and children. The chart below, from the Center on Budget and Policy Priorities, a progressive think tank, illustrates how the CTC operates at present:

Child Tax Credit 1

As currently structured, eligible families receive a credit for a proportion of their earnings (up to $1,000 per child) over $3,000. And because the credit is only refundable on earnings over $3,000, many very low-income families who don't pay federal income tax don't benefit, or don't benefit in full, from the program. The Senate bill, as passed, would increase the cap on the credit (to $2,000 per child) and expand eligibility to families earning higher incomes. The legislation, however, makes only a minor change to the credit's refundability threshold (reducing it to $2,500) and actually caps the proportion of the credit that's refundable (at $1,100), which, again, leaves many low-income families out.

The chart below, also from the CBPP, illustrates who would see the biggest gains from the Senate's changes to the CTC:

Child Tax Credit Chart 2

All in, the CBPP estimates "10 million children under 17 in low-income working families (about 1 in 7 of all U.S. children in working families) are in families that would receive $75 or less from the CTC increase." One-in-three low-income children, meanwhile, would see only a small token increase from the changes.

By contrast, under the Rubio-Lee proposal, a single mother with two children earning $14,500 (working full-time, earning the federal minimum wage) would see her CTC go up by $494, as compared to current law. And the married couple with two children earning $24,000 a year would see their CTC go up by $1,672, as compared to current law.

The changes that Rubio is fighting for don't make for a perfect reform to the Child Tax Credit, but they make for a better one.