Eliminating the Child Tax Credit earnings requirement does more to impact child poverty than increasing benefit levels
The American Family Act's (AFA) proposed reforms to the Child Tax Credit (CTC) present an opportunity to transform the credit into one that works for all children, not just those whose parents earn enough to qualify. We find that the AFA would move 4 million children out of poverty and cut deep poverty among children in half. If the CTC’s credit values were to increase, as they do in the AFA, but with the credit still tied to earnings, this impact would be greatly reduced, and children with the fewest resources would again be left out. Even a less generous hike in the credit value alongside the elimination of the earnings requirement would do more to reduce child poverty than a more generous credit tied to earnings.
Supplementary Analysis
In response to our initial brief, we received a request from several sponsors of the bill, Senator Bennet, Senator Booker, and Senator Brown, for additional analysis by race and ethnicity. We found and reported that the American Family Act would cut child poverty by 42%. It would cut child poverty for Black (non-Hispanic) children by 52%, for Hispanic children by 41%, and for White children by 36%. This work was supported by the Bernard L. Schwartz Rediscovering Government Initiative of the Century Foundation.
In response to our initial brief, we received a request for a more detailed demographic analysis on the effect the American Family Act (H.R. 1560 in the 116th Congress) would have on poverty rates among children.
This fact sheet provides an analysis of poverty reduction under the American Family Act by children's age, children's race and ethnicity, children's family characteristics, as well as state-level estimates. It also provides a nuanced look at the impact of the proposed policy across family income groups, with estimates for children in poverty (below 100% of the Supplemental Poverty Measure threshold), deep poverty (below 50% of the Supplemental Poverty Measure threshold), and in families with low income (below 200% of the Supplemental Poverty Measure threshold).
Our second supplementary analysis shows estimates of the antipoverty impacts of the American Family Act relative to the child poverty rate before and after accounting for the Child Tax Credit under current law. Impacts are shown for all children under age 18 as well as disaggregated by children's race or ethnicity.
Updated April 20, 2021