How To Structure A Permanent Child Tax Credit Expansion

One of the biggest sticking points in negotiations over President Biden’s agenda has been how to extend the American Rescue Plan’s expansion of the Child Tax Credit. The Build Back Better Act that passed the House last month would extend the ARP’s CTC expansion for just one year, but Sen. Joe Manchin (D-W.Va.) has strongly objected to this approach because it obscures the long-term cost of continuing the program, which could total $1.6 trillion over the next decade. Democrats must get creative if they want to preserve this critical accomplishment, which helped cut child poverty in half this year.

There are four main components to the ARP’s CTC expansion. First, it increased the CTC from $2000 to $3000 for couples making under $150,000 and allowed 17-year-olds to qualify for the credit. Second, it provided an additional $600 – bringing the total CTC to $3600 – for children under age 6. Third, it made the CTC fully refundable so low-income families could receive the full credit even if it exceeds their income tax liability. And finally, it made part of the CTC payable in monthly installments to support families throughout the year instead of making them wait until filing their annual tax returns to claim the credit.

Making all these changes permanent would cost roughly $100 billion each year until 2025, and nearly double that amount in later years. The cost jumps because a temporary increase in the CTC from $1000 to $2000 that was included in the 2017 GOP tax bill expires in 2025. By making the ARP CTC levels permanent, Democrats would effectively be paying for the cost of making the last CTC expansion permanent as well as the cost of any new expansions they wish to enact on top of it.