An expansion of the Child Tax Credit (CTC) is back on the table in Congress. Lawmakers announced an overall $78 billion tax plan, including $33 billion over three years for the CTC.

The 2021 American Rescue Plan expanded the CTC for six months and was deemed a major success because of its impact. In that time, the national supplemental child poverty rate hit a historic low of 5.2% and lifted 3 million children out of poverty. At the same time, the child poverty rate for Black children under 17 dipped to 8.1%, with an estimated 716,000 Black children no longer in poverty. 

However, Congress failed to make a deal to save it before the end of 2021, and by the following year, the supplemental child poverty rate more than doubled to 17.8% for Black children. In 2022, without the expansion, 38% of Black children were not eligible for the full credit.

“Sixteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in a statement. 

The Center on Budget and Policy Priorities (CBPP) estimates around 16 million children whose families are low-income would benefit from the proposed expansion. And more than one in three Black and Latino children under 17 would benefit. 

The Tax Relief for American Families and Workers Act of 2024 is a bipartisan tax framework approved by Senator Wyden and Representative Jason Smith, Republican from Missouri and Ways and Means Chairman. Here’s what it currently features:

Changes to the Calculation for the Refundable Credit

To qualify for the CTC, a taxpayer’s earned income must be $2,500 or more. Under this proposal, a taxpayer’s earned income would be multiplied by 15% and multiplied by the number of qualifying children.

Increase to the Maximum Refundable Amount Per Child

The current maximum per child is limited to $1,600. The new proposal would increase the amount per child to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025.

“There are large gains for larger families under this proposal,” says Sophie Collyer, research director at the Center on Poverty and Social Policy at Columbia University. “They were also the most disadvantaged under the current structure.”

Adjustment of Credit for Inflation

In the 2024 and 2025 tax years, the value of the CTC would be rounded down to the nearest $100. Collyer says the actual value of the CTC has fallen drastically in recent years because it was not adjusted for inflation, even in years when inflation was at its highest.

“Even if we went back to the American Rescue Plan’s CTC, if it’s not inflation adjusted, its effects are going to dwindle,” she says.

Determining Earned Income

For the 2024 and 2025 tax years, taxpayers can use their income from the prior year to calculate the maximum CTC if the earned income in the current year was less than the previous.

What’s Next

Not everyone in the country’s legislature is excited about this plan. Senate Republicans and House Democrats argue that the proposed expansion of the CTC does not go far enough, The New York Times reported. It does not have the full support of all, including President Joe Biden, who would prefer a broader expansion. 

“In many ways, it’s keeping a similar structure that makes it different from 2021,” Collyer tells Word In Black. “It’s still a tax credit delivered at tax time and is tied to earnings. And there are still earning requirements associated with the credit.”

The CBPP also estimates that 400,000 children would be lifted above the poverty line, making 3 million children less poor in the proposal’s first year. If approved, the plan would be in full effect by 2025, lifting around 500,000 children out of poverty, making 5 million more less poor.

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