Efforts to expand the Child Tax Credit (CTC) continue to be a hot topic in Congress, with the potential to offer critical financial relief to millions of American families. Lawmakers are currently debating the bipartisan proposal, which aims to restore and expand key elements of the CTC.

This expansion could make a huge difference in the lives of low- and middle-income families, reducing child poverty and providing parents with much-needed economic support.

But what exactly are the potential changes, and how would they affect families across the country?

The Child Tax Credit: A Lifeline for Families

Originally enacted in 1997, the Child Tax Credit has become a crucial financial resource for millions of American families. The credit offers up to $2,000 per child each year, helping parents offset the high costs of raising children. However, not all families benefit equally. According to the Center on Budget and Policy Priorities (CBPP), about 19 million children currently receive partial or no credit because their families’ incomes are too low. These families tend to be ineligible for the full credit because of outdated eligibility requirements that unfairly penalize those with lower earnings.

In 2021, the American Rescue Plan temporarily expanded the Child Tax Credit, increasing the benefit to $3,600 per child under six and $3,000 per child aged six to 17. The expansion also made the credit fully refundable, meaning families who owed little or no federal income tax could still receive the full benefit. This version of the credit lifted millions of children out of poverty, cutting child poverty rates nearly in half during that year.

However, those expanded benefits expired at the end of 2021, leaving many families without the extra support they had come to rely on.

New Legislation: Modest Expansion but Significant Impact

The current bipartisan proposal, led by Senator Ron Wyden and Representative Jason Smith, aims to restore and improve the Child Tax Credit, albeit at a more modest level than the 2021 expansion. Under this plan, the credit would phase in more quickly for low-income families, ensuring that millions of children who currently receive little to no benefit from the credit would see a significant increase in support.

According to estimates from the CBPP, roughly 16 million children in low-income families would benefit from the expansion in the first year. The proposal would also provide a meaningful income boost for those most in need, including families with more than one child. For instance, a single parent earning $15,000 as a food server could see their Child Tax Credit increase by $1,725 in the first year alone.

While the proposal is more modest than the American Rescue Plan expansion, it would still lift as many as 400,000 children above the poverty line in the first year and make another 3 million children "less poor" as their incomes rise closer to the poverty threshold.

Impact on Child Poverty

Child poverty in the U.S. surged after the expiration of the 2021 Child Tax Credit expansion, with an estimated 5 million additional children falling back below the poverty line. The bipartisan proposal is expected to reverse some of this increase, though its impact will be smaller than the more generous Rescue Plan version.

The poverty-reducing effects of the new Child Tax Credit expansion would be particularly notable for families of color, who are overrepresented in low-income jobs due to systemic barriers. More than one-third of Black and Latino children under 17, and three in ten American Indian and Alaska Native children, would benefit from the proposal in its first year, according to the CBPP.

Political Roadblocks

Despite bipartisan support, the road to expanding the Child Tax Credit is filled with challenges. Senate Republicans have expressed concerns over the cost of the expansion, with some arguing that the bill is not adequately funded. Senator Mike Crapo, the ranking member of the Finance Committee, called the bill a “senseless show vote” and argued that it lacked necessary work incentives for parents.

Others, such as Senator Josh Hawley of Missouri, support expanding the Child Tax Credit, but their votes are in the minority within the GOP. Still, there is growing momentum behind the idea that providing financial help to families is a bipartisan issue.

"As Republicans, we should be in favor of helping people who want to have families," Hawley told NBC News.

The future of the Child Tax Credit expansion remains uncertain as lawmakers debate its merits. Still, advocates are hopeful that Congress will come to an agreement to provide much-needed relief to American families. The stakes are high, as the expanded credit has already proven to be one of the most effective tools in reducing child poverty and supporting working parents: 

What’s Next?

If the bill passes, it could offer crucial financial support to millions of families, particularly those struggling to make ends meet. The proposal is set to be in effect for three years, from 2023 through 2025, giving lawmakers a window to see its impact before deciding on further extensions.

For now, families across the country are left waiting, hoping that this much-needed relief comes sooner rather than later. The Child Tax Credit has already shown its potential to transform lives, and its expansion could be a game-changer for millions of children and their parents.

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