Amidst growing momentum to modernize and reform the Child Tax Credit (CTC), U.S. Senator Michael Bennet (D-CO) has introduced legislation to expand the benefits of the current credit for working families. His proposed Child Tax Credit Improvement ActÂ would index the CTC to inflation, increase the value of the credit for families with young children, and allow families to receive a larger refund from the credit on their tax returns.
â€œColoradoâ€™s economic recovery is as strong as any stateâ€™s in the nation, but decades of flat wages is squeezing working families,â€ Bennet said in a press release. â€œWeâ€™ve heard from parents across the state who are doing everything they can to pay the bills, put food on the table, and afford the rising costs of housing and education. They donâ€™t want to work less or take something for free. They are committed to working hard, moving their families forward, and providing opportunity for their kids. Congress needs to find ways to support that commitment. This bill will makes commonsense changes to ensure the child tax credit is helping millions of American families boost their financial security when they need it most.â€
The current credit presently allows qualified families to reduce their federal income tax up to $1,000 per child (equal to 15 percent of their earnings above $3,000) due to the associated costs of raising a child under the age of 17. This brings some relief to low-income working families, who otherwise wouldnâ€™t receive the tax benefits available to families in higher income tax brackets.
The CTC, however, simply doesnâ€™t stretch far enough for working families and those on the brink of poverty. While the Center on Budget and Policy Priorities reports that the CTC kept 3.1 million people out of poverty in 2013â€”including 1.7 million childrenâ€”Senator Bennet intends to expand the impact and reach of the program. His bill would triple the credit to up to $3,000 for children under the age of six, enable taxpayers to receive the refundable portion of the child tax credit for every dollar earned, increase income caps, and ensure that the credit retains its value over time by indexing it to inflation.
The proposed legislation comes amid a national dialogue on child tax benefits and the growing financial pressures on parentsâ€”particularly Millennial parents, who face higher poverty rates, lower incomes, and more student debt than generations before them. Late September, the Center for American Progress released a report on the pressing need for a robust child care tax credit that would benefit more than 6 million children under age fiveâ€”a much higher figure than child care programs like the CTC already in place. Unlike the CTC, the Child Care Tax Credit would be disbursed monthly directly to a quality child care provider of the parentâ€™s choice, meaning parents would not have to wait for reimbursement in their tax refund at the end of the year.