Jan Resseger explains how the federal vouchers are not designed to rescue poor children. Reposted with permission.
Those of us who follow the impact of our society’s growing economic inequality all paid more attention to the role of the federal Child Tax Credit back during the Biden administration when it seemed possible that Congress might restore the kind of refundable Child Tax Credit that existed for one year thanks to the COVID-era American Rescue plan. Back in 2021, during the COVID pandemic, Congress made the Child Tax Credit (CTC) fully refundable for the nation’s poorest families who had previously been excluded because their income was too low to cover the cost of the tax credit. Tragically, at the beginning of 2022, Congress allowed that tax break for the nation’s very poorest families expire.
Reports in recent weeks have explored new data that show how last summer’s omnibus “One Big Beautiful Bill” (OBBB) once again left out the nation’s poorest families, even though Congress increased the federal Child Tax Credit from $2,000 per child to $2,200 per child. If a low income family doesn’t pay enough federal income taxes to cover the cost of what Congress calls a tax refund, that family cannot collect the full tax credit per child which all middle income families and most upper income families receive automatically.
The president of First Focus on Children, Bruce Lesley details how the Child Tax Credit’s refundability provision now works under last summer’s “One Big Beautiful Bill”: “The credit is divided into a non-refundable portion and a refundable portion. Families who owe little or no federal income tax—because they earn too little to owe it—cannot benefit from the non-refundable piece. The refundable portion is then subject to a phase-in formula: families can only receive the lesser of 15% of their earnings above $2,500 up to an arbitrarily-imposed cap of $1,700 per child as a tax refund.” Under OBBB, higher income families now receive the full $2,200 Child Tax Credit for each of their children.
In a new report for The Institute on Taxation and Economic Policy (ITEP), Joe Hughes outlines the consequences: “While a handful of children are ineligible for the full Child Tax Credit (CTC) because their families are too rich, a much larger number of children are ineligible for the full CTC because their families are too poor… Under One Big Beautiful Bill Act (OBBBA)… many children are barred from receiving the full credit in 2026, including:
- “30 percent of all children in the U.S.;
- “Virtually all (99 percent) of children among the poorest fifth of Americans, the families who most need help;
- “About 40 to 50 percent of children in Black, Hispanic and Native American families;
- “About 22 percent of children in white families; (and)
- “A higher share of families with young children.”
Hughes explains how families with very young children face a particular penalty: “While the income restrictions leave out children of all ages and races, children with certain household characteristics are less likely to receive the full credit…. Households with older children are more likely to receive the full credit than households with younger children. And white and Asian children are much more likely to receive the full credit than Black, Hispanic, or Native children. Those differences are due to income disparities that persist across racial groups and child age…. Among households where the youngest child at home is less than six years old, 38 percent of children will not receive the full CTC in 2026. This contrasts with 27 percent of children in households where the youngest child is 6 or older. Households with younger children typically have younger parents… meaning the primary income earners are earlier in their careers and earning lower pay. Additionally many parents will temporarily exit the paid workforce or reduce their hours when they have younger children at home.”
First Focus on Children’s Bruce Lesley points out the “striking contradiction” in federal policy that makes the Child Tax Credit more punitive than other federal economic support programs for families with very young children: “(T)he ‘One Big Beautiful Bill’ itself imposes work requirements in SNAP and TANF, but it does not require work of parents of newborns and infants in those programs. SNAP exempts parents of children under age 13 from work requirements. In this case, Congress recognized that requiring work-first from parents of babies is neither practical nor humane. Yet in that same bill, the Child Tax Credit’s earnings-based, phase-in effectively functions as a work and earnings requirement on the parents of babies and children.”
Both ITEP’s Hughes and First Focus on Children’s Lesley recommend that, to solve the injustice in the Child Tax Credit, Congress should bring back and pass the American Family Act, which was originally proposed by Rep. Rosa DeLauro (D-Ct.), Sen. Michael Bennet (D-CO) and Sen. Sherrod Brown (D-OH), who served in Congress through 2024. Under that bill, reports Lesley, “the average Child Tax Credit benefit for the poorest fifth of families would have been $4,900, and $2,780 for the middle fifth. Child poverty would be cut in nearly half.”
Why is understanding the tragic impact of the “One Big Beautiful Bill” on the federal Child Tax Credit so important for readers of this public school policy blog? Kevin Welner, a professor of education at the University of Colorado and executive director of the National Education Policy Center, traces the impact of child poverty on our nation’s public schools: “Those of us who work in or with schools never question the enormous impact that a teacher or school can have on a student. But this essential truth coexists with another truth: that differences between schools account for a relatively small portion of measured outcome differences. That is, opportunity gaps in the U.S arise primarily outside of schools. This should not be a surprise. Poverty, concentrated poverty, and racialized poverty are pervasive features of America. School improvement efforts cannot directly help children and their families overcome decades of policies that perpetuate systemic racism and economical inequality. When children are born in the United States, their educational and life outcomes can all be predicted based on their parents’ education, income and wealth. Compared to the Scandinavian countries and other so-called Western democracies like Canada, Spain, Australia, and New Zealand, American children are inordinately trapped in intergenerational poverty. Inequality in the U.S. is stark and enduring.”