The Truth Behind the “Expanded” Child Tax Credit for Montana Families

Dec 19, 2017

Meeting behind closed doors, the U.S. Senate and House conference committee reached agreement last week on the final GOP bill to massively overhaul the nation’s tax system. Congress is expected to cast votes on the tax plan today. The Child Tax Credit (CTC) received a lot of attention last week as last minute changes were made to (almost) meet the demands of Senator Marco Rubio. With the final bill ready for a vote, it is clear that the last-minute changes to the Child Tax Credit (CTC) that Republican leaders put in their final tax bill do not change the fundamental fact that low-income working families still would largely miss out on the full increase from the current $1,000 per child to $2,000. In a previous fact sheet, we explained how the Child Tax Credit works. The CTC as it stands is a tax credit that provides up to $1,000 for households with a child 16 years or younger. In 2015, 49,050 Montana families claimed the Additional Child Tax Credit (ACTC), which is the refundable portion of the CTC. This means that if the value of the CTC exceeds the amount of federal income tax a family owes, the family may receive part or all of the difference in the form of a refund check. The CTC is an effective way to lift children and families out of poverty. This credit frees up additional income that working families need to make ends meet. CTC helps families achieve that goal by supplementing wages when parents’ do not earn enough to meet basic needs, like paying the rent, putting food on the table, and buying diapers or a winter coat for their children. The final GOP tax bill would increase the maximum Child Tax Credit (CTC) from the current $1,000 to $2,000 per child under age 17 – up from $1,650 in the prior Senate version — with $1,400 of that refundable, but low-income working families would largely miss out on this expansion. While doing virtually nothing to strengthen the CTC for the lowest-income working families, the plan calls for raising the income level for CTC eligibility, thereby making the credit available to families earning six-figure incomes. Under the final tax plan, filers may claim the full credit to $200,000 for single parents, up from $75,000 today; and to $400,000 for married couples, up from $110,000. These changes mean: Under the Senate Republicans’ proposal, more than 30 percent of children in working families in almost every state would receive less than the full increase. The CTC changes in the Senate bill will ultimately benefit higher-income households, whereas single parent or two parent families working minimum wage jobs will receive less of the CTC than they currently do. At every step in the process, House and Senate Republicans have tilted their tax bills against working families. The conference committee should address these inequities, but instead they dole out even bigger tax cuts for the wealthy and corporations. Congress must ensure that the 31,000 children in low-income families in Montana receive more than just a token $75 or less from the CTC increase.  Ultimately, the revisions to the CTC does not change the true winners and losers. Low- and middle-income folks, working families with children, and Montanans with health care needs will not benefit if the GOP’s plan to overhaul our tax system becomes law.
Montana Budget & Policy Center

Shaping policy for a stronger Montana.

MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.