Congress has announced a major tax deal aimed at expanding the child tax credit. This move comes as a response to the growing concerns regarding the financial burden faced by families in raising children. The new legislation seeks to alleviate this burden by providing additional financial support to parents.
The expansion of the child tax credit is a significant step towards promoting social welfare and ensuring that families have access to necessary resources. By increasing the amount of money that parents can claim for each child, Congress acknowledges the importance of investing in future generations.
Ron Wyden and House Ways and Means Committee Chairman Jason Smith negotiated the framework, which would still need to be approved by both chambers of Congress. They face a tight deadline to implement any changes to the tax code with the 2023 tax filing season beginning on January 29.
The committees have been discussing the package for months, and hope to move it soon as a stand alone bill, or potentially attached to a stopgap spending bill. The independent Joint Committee on Taxation estimates the plan could roughly $70 - 80 billion. Aides expect they could cover the cost by overhauling a COVID relief tax credit to save about the same amount in revenue for the government.
CBPP wrote. “In the first year, the expansion would lift as many as 400,000 children above the poverty line. 3 million more children would be made less poor as their incomes rise closer to the poverty line.”
Beginning in 2024, families would be allowed to calculate their eligibility using either their current income or their income from the prior year. So if, for example, a parent earned more than $2,500 in 2023 but lost their job in 2024 and fell under $2,500, they could use their 2023 income when filing their taxes that year (unemployment insurance payments do not count as part of a family’s income for the child tax credit). That would allow the country’s poorest families to still get the credit if they experienced a sudden change in employment or left the workforce due to caregiving responsibilities, for example. 
Other changes include adjusting the credit for inflation starting in 2024, and allowing parents to use current or prior-year income to calculate their credit.
The nonpartisan Center on Budget and Policy Priorities, in a report released Tuesday, said the changes would allow a single parent with two children who earns $13,000 to see their credit double in the first year, or a married couple earning $32,000 to see a $975 gain.
The CBPP estimated overall the change could lift as many as 400,000 children above the poverty line in its first year, and 500,000 children or more when fully in effect.
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