Association for Public Policy Analysis & Management

The child tax credit (CTC) provides substantial assistance to families at most income levels. The credit’s design - phasing in for most families after the family has earned at least $3,000 and phasing out once income reaches $75,000 ($110,000 for married couples) – means that millions of children receive less than the full $1,000 per child credit each year. In some cases, families simply do not earn enough; in others, income is too high. This paper uses the Tax Policy Center microsimulation model to analyze who does not receive the full credit and how that changes under various reforms. Some reforms (such as a doubling of the credit) would tilt credit benefits towards higher income families while other reforms (such as reducing the refundability threshold) target benefits to the lowest-income recipients. The paper will estimate the cost and distributional impact of recent congressional proposals, identifying the trade-offs associated with various approaches.