Child Tax Credit: Polling Shows Bipartisan Support for Extension Beyond 2025 — What Are the Pros and Cons?

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While it might seem challenging to find any bipartisan support for any legislation lately, one issue that appears to unite parties is the backing for the extension of the Child Tax Credit beyond 2025.

Indeed, a new poll from American Policy Ventures (APV), conducted by Cygnal, found that a significant plurality of voters support a bipartisan compromise that provides lower-income families with a more generous CTC, with two-thirds of voters wanting to see Congress work on a solution.

President Joe Biden expanded the CTC through the American Rescue Plan Act in 2021, which increased its amount to $3,600 from $2,000  for qualifying children under age 6, and $3,000 for other qualifying children under age 18. The credit was also made fully refundable, according to the Treasury Department.

However, the expansion — which, according to a September 2023 White House statement, cut child poverty by nearly half to record lows for all children in the country — ended and the CTC reverted to its initial amount.

It now provides up to $2,000 per child, phasing in when earned income exceeds $2,500 and phasing out when income exceeds $400,000 for joint filers, according to the Tax Foundation.

“The current design expires after 2025, at which point the CTC will shrink to a $1,000 credit that phases in when income exceeds $3,000 and phases out when income exceeds $110,000 for joint filers,” the Tax Foundation noted.

According to Peter C. Earle, economist at the American Institute for Economic Research, the CTC enjoys widespread support because it can be viewed from dual perspectives.

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“It’s seen as aligned with social equity and the welfare state by the left, and as pro-family by the right. It also puts taxpayer money back in taxpayer hands, which is aligned with conservative values,” said Earle.

Pros: Ending Child Poverty

As Paolo Mastrangelo, co-founder and co-president of American Policy Ventures, wrote in Real Clear Policy, with inflation, the upcoming 2025 sunset of the policy which will drop the credit to $1,000 benefit seen in 2001″is a slap in the face to modern American families — families just 22 years ago were much better off, with $1,000 getting you almost twice as far as it does today.”

Mark Luscombe, principal analyst for Wolters Kluwer‘s tax and accounting division North America, said that studies have shown that the ChiCTC, especially the refundable portion and the advance payments in effect during COVID, measurably contributed to a significant reduction in child poverty in the United States.

In fact, Census data from September 2023 showed that the child poverty rate more than doubled between 2021 and 2022 to 12.4% following the end of the credit expansion.

Also underscoring this fact, a Center on Budget and Policy Priorities analysis found that if Congress had continued the American Rescue Plan’s CTC increase in 2022, 3 million additional children would have been kept out of poverty, preventing more than half of the 5.2 million increase in the number of children in poverty last year, and the child poverty rate would have been about 8.4% rather than 12.4%.

What do CTC Critics Say?

One of the arguments of critics of the CTC is that it would have an enormous impact on the workforce.  

In addition, some critics, such as the Cato Institute, argue that “as an anti-poverty program, the CTC is poorly targeted.”

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Finally, as Luscombe noted, “the deficit hawks in Congress are focused on reducing federal government spending, and extension of the CTC at its current levels will have to be paid for by revenue increases, spending reductions in other areas, or add further to the deficit.”

“The Biden Administration would even like to restore some of the higher levels of the credit and refundable features in effect during COVID, adding further to these costs,” he added.

Other critics argue that the higher poverty level is not due to the end of the CTC expansion, but to inflation.

“Inflation pushed the poverty threshold up at the fastest pace in decades. If the change in poverty rate had just been due to the end of the tax credit, then the poverty rate for children would’ve simply returned to where it was before the tax credit’s expansion,” said Heritage Foundation public finance economist EJ Antoni.

Antoni also argued that it’s difficult to overstate the severity of the spending and borrowing problem at the federal level today.

“The Treasury has borrowed over $500 billion in the first three weeks of this month alone, more than double what it borrowed in October 2022,” he said. “It’ll be a miracle if the deficit for this fiscal year is $2 trillion; we’re on pace for well over $3 trillion. We need to cut the budget anywhere and everywhere as fast as possible,” he added.

Glimpses of Bipartisan Action

In July, the bipartisan Problem Solvers Caucus said that House centrists seek common ground on the CTC yet, differences in the approach still remain. While Senate Democrats are aiming to revive the 2021 expansion, top Republicans have said they’re not interested in it.

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“Still, there were hints at a Senate Finance Taxation and IRS Oversight Subcommittee hearing last week of potential interest in working across the aisle on the child credit,” according to the Caucus.

 Yet, as the American Institute for Economic Research’s Earle noted, to the extent that government programs become entrenched, people come to rely upon them. 

“Inevitably they expand, drawing in more benefits and costing more, ultimately becoming a political football. There’s never been a single political program that didn’t follow that arc,” he added.

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