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What is the Child Tax Credit & What It Means for North Carolina Families

LATEST: A bipartisan bill which would extend the expanded Child Tax Credit through 2025 has passed the House and is now awaiting a Senate vote.

  • The Child Tax Credit empowered parents to build more stable homes for their children, cutting childhood poverty in half and helping 61 million American children.

  • In 2021, child poverty fell to its lowest level ever in America as low-income parents were able to catch up on food, bills, and rent.   

  • In 2022, partisan posturing in Congress blocked CTC, causing childhood poverty to surge by 41%.

  • A new bipartisan bill  being voted on in Congress would expand the CTC, with the greatest benefit felt by lower income families.

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Prioritizing Families

The expansion of the Child Tax Credit has been the most successful program since WWII at ensuring parents have the support they need to lift themselves and their children out of poverty. 

 

This bi-partisan program empowered parents to make ends meet and gave them the flexibility to spend the cash on what their family needed most, whether that was childcare, housing, or healthy food. The cascading benefits of the program enabled parents to catch up on bills, food, and rent—stabilizing low-income homes across the country and lifting millions of American children out of poverty!

The program's success received broad support from Americans across the ideological spectrum.  Conservative evangelicals, liberal progressives, and a vast swath of the silent majority of America sitting in the middle all understand that it serves no one for a child to start their lives anchored in deep poverty. 

Americans know that growing up in poverty is one of the biggest barriers to a child's ability to claim the American Dream and reach their God-given potential. It's why our nation has always taken special steps to protect our children and invest in programs that ensure a more equal opportunity for all.

But partisan posturing in Washington last year blocked a continuation of the tax credit.  As a result, childhood poverty spiked back up 41% in 2022. 

Fortunately, a push by faith groups and continued efforts to find a solution by Committee leaders resulted in a bipartisan deal that was passed in the House and is currently awaiting a Senate vote. If passed, this bipartisan compromise will create a new expansion of the Child Tax Credit through 2025 and benefit 61 million American children, with the greatest impact on American families struggling to make ends meet. 

"I lost my job during the pandemic, and my wife and I had to deplete our savings to help pay the costs of raising our family. I'm now working full-time again, and the tax cut our family received thanks to the expanded Child Tax Credit is helping us build our savings back again so we'll be able to face the unexpected expenses that come with raising four kids." — Benny, Arizonan and proud father of four

Impact of Child Tax Credit Expansion

In 2021, President Biden signed the American Rescue Plan into law, which included the One-Year Child Tax Credit Expansion.  All parents were treated equally and received the same tax credit.  But the $3000-3600 tax credit had a much bigger impact on struggling families making only $20,000 than those making $150,000.  That is why the Child Tax Credit is so effective at lifting children out of poverty.  

The expanded Child Tax Credit gave each parent a tax credit worth $3,000-per-child ($3,600 for children under age 6). Importantly, it made the credit fully refundable for families, ensuring that families struggling the most could fully access the extra help. Additionally, the IRS began issuing monthly payments to families from July to December 2021, covering half of the credit in advance, and ensuring it was spread out and easier to fit into family budgets.

The Expanded Child Tax Credit played a crucial role in preventing millions of children from going hungry as well. Within a week of its implementation, the percentage of households with children experiencing food scarcity dropped from 13.7% to 9.5%. Spending reports indicated families who benefited from the new tax credit utilized it to buy clothing, food, household items, and pay for other necessities for their children and school. 

 

An analysis conducted by the Urban Institute revealed that making the expanded Child Tax Credit permanent would reduce child poverty by an additional 40%, lifting 4.3 million additional children out of poverty and significantly improving the lives of another 16 million kids in low-income households. Overall, 61 million American children benefit from the Child Tax Credit.

Economist Hunger Chart

With the benefits to American families so clear, religious leaders across the country have implored our elected officials to make the expanded Child Tax Credit permanent. The Conference of Catholic Bishops wrote, “Especially in this moment of economic uncertainty, we urge you to take action to ensure the progress made in the fight against child poverty this past year is not lost and that we build on these gains."

The National Association of Evangelicals, Georgetown University’s Center on Faith and Justice, Students for Life, National Latino Evangelical Coalition, the Episcopal Church, National Hispanic Pastors' Alliance, Bread for the World, and the Evangelical Lutheran Church in America also rallied behind the Child Tax Credit, invoking the Gospel of Matthew and urging lawmakers to care for the “least of these.” 

GOP Refused to Renew Expanded Child Tax Credit

Unfortunately, the one-year expanded child tax credit expired at the end of 2021 due to opposition from a coalition of Congressional Republicans. Many of them claimed it was too expensive.

 

As a result of the partisan posturing, the credit for families was cut in half in 2022, and it was made only partially refundable.

 

Child poverty surged by 41% in January 2022, the first month without the expanded tax credit. 

New Bill Will Expand and Strengthen the Child Tax Credit

But advocates and Congressional leaders did not give up.  Shortly after Christmas, a bipartisan deal was recently reached in Congress that would further expand the Child Tax Credit in 2024 and tie it to inflation, adding an additional $100 per-child to the credit next year.


Fortunately, a push by faith groups and continued efforts to find a solution by Committee leaders resulted in a bipartisan deal that is currently being voted on in Congress to pass a new expansion of the Child Tax Credit through 2025.  If passed, this bipartisan compromise will benefit 61 million American children, with the greatest impact on American families struggling to make ends meet.

 

The framework of this deal was made possible by a bipartisan coalition of pro-life and pro-family advocates and elected leaders, including the National Association of Evangelicals, United States Conference of Catholic Bishops, American Enterprise Institute, and the National Hispanic Christian Leadership Conference, among many others. In display of bipartisanship, the Child Tax Credit expansion passed the House 357-70. The success of this bill shows what’s possible when Congress comes together to protect our nation’s most vulnerable.

"The Child Tax Credit reforms in this bill are pro-family policies,” said Ways and Means chair Jason Smith (R-Mo).

If passed, the bill would enable lower-income families to claim more of the credit—getting much needed dollars into the hands of struggling families. It would increase the maximum refundable credit for working parents in households who owe little or no income taxes. And it would allow low-income families with more than one child to receive the same credit for each of their kids, just as higher-income families already do.  And families would have the choice of using their earnings in the current year or the prior year, in case their earnings were volatile.

In addition, it would adjust the tax credit for inflation starting in 2024.

 

The proposed expansion would benefit 36 million American families overall and 61 million children, with the greatest impact and benefit to children living below or near the poverty line. It would also impact about 500,000 military families.

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