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

Authors

Jacob Bastian

Senior Fellow, Competition Policy

Ryan Crow

Director, Policy Operations and Strategy

Introduction

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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