Abstract
Under current policy, the federal government provides $209.4 billion in tax benefits for filers with children through five major provisions: the child tax credit (CTC), the earned income tax credit, the dependent exemption (scheduled to return in 2026), the head-of-household filing status, and the child and dependent care tax credit.
In designing child tax benefits, lawmakers need to consider a host of trade-offs beyond federal revenue and government spending — including how these policies affect the equity, efficiency, and simplicity of the tax code and the material well-being of households and children.
Recent proposals to expand the CTC and other child benefits — Joe Biden’s American Rescue Plan, recent legislation adopted by the House Committee on Ways and Means, and Sen. Mitt Romney’s (R-UT) proposed Family Security Act — would increase total annual benefits for households with children by between $64.4 billion and $122.3 billion, mostly by increasing federal outlays.
These proposals would all increase the tax code’s progressivity and reduce child poverty, but they would impede work incentives for low-income families with children by raising marginal tax rates.
Citation
@techreport{BrillPomerleauSeiter:2021,
title = {The Tax Benefits of Parenthood: A History and Analysis of Current Proposals},
author = {Brill, Alex and Pomerleau, Kyle and Seiter, Grant M.},
year = {2021},
month = feb,
institution = {American Enterprise Institute},
type = {AEI Report}
}