Explainers Competition Policy

Proposing a Cost-Effective Child Tax Credit that Will Reduce Poverty and Have Bipartisan Appeal


Jacob Bastian
Senior Fellow, Competition Policy
Ryan Crow
Director, Program Design, Impact, and Implementation

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The child tax credit (CTC) is at the center of an ongoing debate about optimal strategies to reduce child poverty. Policymakers have been assessing cost-effective ways to structure the CTC to achieve two key goals: reducing poverty and not discouraging parental employment. One of the key questions of this debate is whether CTC benefits should be available only to working parents with earnings above a certain level or whether benefits should also be available to the poorest families without working parents. Having benefits that do not depend on working ensures that benefits go to the poorest families, but it also
introduces a small work disincentive. In deciding whether and how to expand the CTC, policymakers should balance concerns about the CTC’s fiscal cost with how the CTC would impact family poverty and parental employment.

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