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Hopes for Expanded Child Tax Credit Rest on Parental Work Requirement — How It Could Happen

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Hopes for another round of expanded Child Tax Credits (CTCs) before the end of 2022 might hinge on a requirement that parents work to become eligible. To get there, U.S. lawmakers will likely have to compromise on certain measures in a larger tax bill. However, advocates have said it’s the best chance for more generous credits before the new year begins.

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Under the Biden administration’s 2021 American Rescue Plan, the CTC was expanded from $2,000 per child to $3,000 per child for children over the age of six, and from $2,000 to $3,600 for children under the age of six. It also raised the age limit from 16 to 17 years old.

But efforts to extend the credit last year fell short in the Democrat-controlled Congress, as some Dems opposed the extension. The current, non-expanded version of the credit is only partially refundable. This means non-working parents receive no credit at all and many working parents receive only limited credits, according to the Tax Policy Center. The result is that nearly 19 million of the poorest children receive less than the full benefit.

Attempts are now being made to revisit the issue during the current lame-duck session of Congress, Vox reported. This is a major challenge, considering that Democrats would need at least 10 Senate Republicans to agree to pass such a measure.

Make Your Money Work

One thing lawmakers might have to agree on is to include a parental work requirement to qualify for the expanded CTC. Sen. Joe Manchin, a Democrat from West Virginia, resisted any expanded CTC that would go to families with no working parent.

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Most Democrats have opposed a parental work requirement, but that could change with Republicans set to take over the U.S. House in 2023. A greater number of Democrats might support a work requirement if it means passing legislation during the current session. This will likely require certain compromises on both sides of the political aisle, such as restoring expiring business tax breaks in exchange for an extended CTC.

“I’ll put it this way: no more tax breaks for big corporations and the wealthy unless the child tax credit’s with it,” Sen. Sherrod Brown (D-Ohio), chair of the Senate banking committee, said in a September statement.

As the Tax Policy Center noted, those who support a work requirement argue that if you give people money without requiring them to work, then they either won’t work or will work fewer hours. This could eventually make them worse off financially.

But data is unclear on how much an expanded credit actually impacts the work habits of beneficiaries. Survey data from 2020-21 analyzed by officials at the Tax Policy Center and the Urban Institute found no evidence that expanded CTC recipients worked less.

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Meanwhile, a separate survey found that about one quarter of parents used the expanded CTC to pay for child care — something they need to be able to hold jobs in the first place. In addition, researchers at Columbia University and other institutions found no significant declines in employment by CTC recipients.

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