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@jacobsgoldin and I have a new working paper that looks at which children benefit from the Child Tax Credit and which do not.
Ungated version here: http://papers.nber.org/tmp/63325-w27940.pdf
A thread on some of our takeaways:
Ungated version here: http://papers.nber.org/tmp/63325-w27940.pdf
A thread on some of our takeaways:
Background: The full child tax credit is $2000 per child but not all families qualify for this full amount. There are limits based on family earnings, tax liability, where the child lives, and who the child lives with.
Using census data on household composition and income, we find these limits lead to stark differences in tax benefits by income and race:
Nearly three-quarters of white children are eligible for the full child tax credit, compared to only half of children who are Black or Hispanic:
While nearly all children in the top half of the income distribution qualify for the full credit, most poor children (nearly 90% in the bottom income decile) are ineligible:
There is a ton of great research showing short and long-term benefits to low-income kids from cash transfers like the CTC. Yet none of the children who receive the full CTC live below the poverty line, while three-quarters of the completely ineligible children do so.
COVID-19 is likely to widen disparities in who benefits from the CTC, as job loss has been concentrated among lower-income families and communities of color. E.g., nearly 40% of workers in households with earnings below $40,000 lost work.
[link: https://www.nytimes.com/2020/05/14/business/economy/coronavirus-jobless-unemployment.html]
[link: https://www.nytimes.com/2020/05/14/business/economy/coronavirus-jobless-unemployment.html]
Biden has proposed lifting the CTC refundability limits, which we estimate would go a long way towards evening out the credit’s benefits by income and race. https://twitter.com/SethHanlon/status/1306655090976137223?s=20
More detailed analysis of Biden proposal here: https://itep.org/new-itep-estimates-on-bidens-proposal-to-expand-the-child-tax-credit/
Helpful comparison of many of the CTC reform ideas by @ElaineMaag and @NikhitaAiri: https://www.taxpolicycenter.org/publications/understanding-maze-recent-child-and-work-incentive-proposals
This work builds on excellent work by @lenburman and Laura Wheaton:
http://webarchive.urban.org/publications/411232.html
http://webarchive.urban.org/publications/411232.html
And work by @GreensteinCBPP, @ElaineMaag, @dashching, Emily Horton, and Chloe Cho: https://www.mobilitypartnership.org/improving-child-tax-credit-very-low-income-families
