By Andy Nielsen 

This post was published as an op-ed on October 21, 2021 in the IndyStar. 

Congress is currently considering the Build Back Better Act that would prevent major changes to the Child Tax Credit (CTC) from expiring at the end of 2021. The current debate on this sizable piece of legislation focuses on one thing – the price tag. Specifically, how much is Congress willing to spend on transformational social policy?

Many numbers have been thrown around: $3.5 trillion, $2 trillion, $1.5 trillion maximum. It is worth noting that it will cost something – statements that this bill will pay for itself are supported more by politics than economic analysis. However, focusing on a price tag alone is a flawed assumption. This is not a spending decision, it is an investment decision.

Build Back Better addresses fundamental problems in our economy and the value we place on our fellow citizens. The legislation is the offspring of several plans that include policy solutions supported by research and empathy. It appears the question now is whether the risk of adding a fluctuating, undetermined amount of money to the national debt is worth the reward of ensuring everyone in this country has stable housing, enough to eat and that children do not live in deprivation.

The most recent indication is that Congress will fund many of Build Back Better’s provisions over a shorter term to reach consensus and achieve passage of a bill itself. It is imperative that as negotiations continue, investments in children and their futures through the expanded CTC stay intact.

As written, the bill extends the changes made to the CTC in the American Rescue Plan (ARP). This includes increasing the amount of the credit for children in some households and the option to receive part of the credit through advance monthly payments. However, Build Back Better goes even further by making the credit permanently refundable, allowing low-income families to capture the full value of the credit. This is extraordinary news for families and households who need it the most.

Some lawmakers have floated the idea of imposing a work requirement on the CTC as a method to means test the credit. While this would reduce the cost, imposing a work requirement pulls the credit away from its primary goal, which is to benefit children.  

Prior to the ARP, the maximum credit per child was $2,000. The credit was incredibly regressive, as taxpayers’ refundable portion was limited to 15 percent of earnings over $2,500, capped at $1,400. Some argued this was to incentivize work, but low-wage workers were held to a higher standard in order to receive the same benefit as their higher-earning counterparts.

For example (in 2018), assume a single father with one five-year-old child worked 40 hours per week, 52 weeks a year at minimum wage, equating to $15,080 in total wages. He filed as Head of Household, bringing his taxable income to $0 after the standard deduction. Since he had no taxable income, he had no tax to offset with tax credits, and his calculated refundable credit was $1,887. But since this was capped, he received just $1,400. To receive the full credit, he would have needed to work an additional 24 hours per week, all 52 weeks.

Under previous law, working full time was not enough. You needed to earn more or work even harder to qualify for a benefit intended for your child. This was the tax code’s way of proving that it valued children from higher-income families more than children in less affluent households. This presents a much larger question: what should be the actual goal of the CTC?

The fundamental goal of the CTC is to benefit children. Plain and simple. The credit is an investment in the future productivity that a child will generate for society. It should be fully available to all children in families who actually need it to help offset the costs of child rearing. Under the example above, Build Back Better provides $3,600 because the focus is on the child and not on a misguided work requirement. Congress has a duty to maintain these provisions in a final agreement. If cost is the issue, Congress should be more critical of allowing married households earning $400,000 to redeem a $2,000 CTC per child.

We already know the impact of these changes – reducing childhood poverty in Indiana by 43% and increasing the number of children fully benefiting from the credit by 558,000 (of whom 45 percent are non-White). The debate on the future of these programs will continue, but what should not be up for debate is the importance of investing in children and improving their quality of life.