Dear Chairman Smith, Ranking Member Neal, and Distinguished Members of the US House Ways and Means Committee:
Thank you for the opportunity to submit written comments for the hearing record on The Need to Make Permanent the Trump Tax Cuts for Working Families, held on January 14, 2025. On behalf of Children’s HealthWatch, a national network of pediatricians and child health researchers, we appreciate the focus on the Child Tax Credit (CTC) and write in strong support of its expansion.
As the Committee considers tax reform amid the expiration of the 2017 Tax Cuts and Jobs Act (TCJA), we encourage you to pass the following expansions that center the needs of children and families with low incomes, and respond to financial realities they face across the country:
- Pass a permanent, fully refundable, and inclusive CTC that ensures all children are eligible for the full credit, including 17 million children under the age of 17 whose families don’t earn enough to qualify for the full amount;
- Increase the maximum CTC for all children, with a further boosted credit available to young children;
- Index the CTC to inflation, thereby protecting its value over time;
- Allow families to receive the CTC in reliable, monthly payments;
- Reduce structural barriers to the CTC and other family tax credits by investing in effective, community-driven outreach efforts and providing adequate resources to the Internal Revenue Service (IRS) to improve customer service and operations.
Children’s HealthWatch seeks to achieve health equity for young children and their families by advancing research to transform policy. We accomplish this mission by interviewing caregivers of young children on the frontlines of pediatric care in urban emergency departments and primary care clinics in four cities: Boston, Minneapolis, Little Rock, and Philadelphia. Since 1998, we have interviewed over 80,000 caregivers and analyzed data from those interviews to determine the impact of public policies on the health and development of infants and toddlers.
The TCJA included several changes that strengthened the CTC for working low- and middle-income families. These included doubling the maximum credit from $1,000 to $2,000 per child, lowering the phase-in threshold from $3,000 to $2,500, and increasing and indexing the refundable portion of the credit, now capped at $1,700 per child. These changes reduced taxes for all eligible families and provided an average of $60 in additional tax benefits to families with children in the lowest one-fifth of the income distribution.
While the changes to the CTC under TCJA delivered meaningful relief for families, the phase-in rate and earnings threshold continued to exclude millions of children because their families did not earn enough to receive the full credit. Arguably, these are the children and families most in need of the CTC and the important health benefits it provides. As of 2023, one in four children in the United States under the age of 17 were excluded from the full credit because their family incomes were too low to qualify. Disproportionately, these are young children, children in rural areas, children in larger families, and children in single parent families. In 2023, 33 percent of children in large families and 30 percent of rural children were ineligible for the full CTC because their family income was too low.4 Furthermore, in 2023, 87 percent of children living below the federal poverty line and 32 percent of those living between 100 percent and 200 percent of the federal poverty line were ineligible for the full CTC, compared to 5 percent of children living above 200 percent of the federal poverty line.4
Pass a permanent, fully refundable, and inclusive CTC that ensures all children under the age of 18 are eligible for the full credit.
We appreciate efforts by the Committee in 2024 to target and improve the CTC to those 19 million children who are currently left out of the full credit. The provisions passed in the Tax Relief for American Families and Workers Act of 2024 – moving to a “per-child” phase-in to ensure families with low incomes receive the same credit for each of their children, as higher income families already do; increasing and ultimately eliminating the refundability cap; and allowing families to use their earnings from the prior tax year when calculating CTC – would have had a profound effect for families with the lowest incomes, fluctuating incomes, and with multiple children.
The American Rescue Plan Act of 2021 (ARPA) temporarily eliminated the phase-in threshold and made the CTC fully refundable, enabling previously ineligible children in poverty to receive the full credit for 2021. This provision addressed long-standing inequities in the tax code and ensured that children in families with the lowest incomes were supported. Coupled with a boosted maximum credit that newly included children aged 17, this provision has been credited with cutting child poverty by nearly half. We appreciate Chairman Smith’s reference to this as the lowest poverty rate on record and encourage the Committee to return to such a structure that permanently cuts child poverty. Furthermore, research from Children’s HealthWatch found that the expansion reduced food insufficiency by 26 percent, helped families catch up on rent, and improved parental mental health., While the provisions passed by the Committee and House in the Tax Relief for American Families and Workers Act of 2024 would provide a meaningful first step in delivering tax relief for working families with low incomes, we encourage the Committee to use TCJA expiration as an opportunity to return to the ARPA structure – fully refundable, bigger, and inclusive of children age 17 – to reach children and families in the greatest need.
Increase the maximum CTC for all children, with a further boosted credit available to young children.
TCJA temporarily expanded the maximum CTC from $1,000 to $2,000 per child. ARPA built on this improvement, increasing the maximum credit to $3,000 for each child aged 6-17, and $3,600 for each child under age 6. As stated above, this change – in conjunction with full refundability – had a profound impact on all families, particularly those with the lowest incomes. The boosted resources supported financial stability at a time of economic uncertainty, and allowed families to afford necessities and other resources that help children thrive. The further boost for young children recognized both the increased costs for families – from formula to child care – and the critical window of child growth and development, in which poverty has severe short- and long-term consequences. We encourage the Committee to make a meaningful investment in our children by restoring these benefit levels. Further, we encourage the Committee to consider an additional boost for newborns, regardless of the month they were born, that recognizes increased costs and often simultaneous loss of income, particularly for women. We appreciate that this need was highlighted by witnesses at the hearing.
Index the CTC to inflation, thereby protecting its value over time.
Indexation is essential to prevent erosion of the CTC over time. Increases in inflation over the last several years have especially affected families with children and underscore the need to index tax credits and other benefits to inflation. Since 2018, the Niskanen Center reports that the CTC has lost 15 percent of its real value to inflation. We appreciate the Committee’s recognition of this with the inclusion of modest indexation in the House-passed Tax Relief for American Families and Workers Act of 2024 and encourage its continued commitment to this provision.
Allow families to receive the CTC in reliable, monthly payments.
As part of the ARPA CTC expansion, the IRS automatically delivered up to half of the credit through advance, monthly payments (July-December 2021) as an alternative to an annual lump sum. This allowed families to incorporate the additional income into their monthly budget and better afford basic needs. A study found that nearly half of families with children who received the advance CTC payments preferred the monthly structure; this preference increased among families with incomes under 200% federal poverty line. Many families reported that the monthly payments allowed them to purchase basic needs like food and diapers, afford rent and utility costs, and cover educational costs like tutoring and extracurriculars. Contrary to concerns around the will to work, this research found no differences in employment among families receiving the ARPA CTC. In fact, families with low- to moderate-incomes who received the advance CTC were more likely to gain new professional skills – an outcome that supports family economic mobility and the economy as a whole. Finally, new research shows that the payments were associated with a decrease in tobacco use among parents, demonstrating a further health benefit for the whole family.
We recommend that the Committee directs the IRS to restore the option for monthly payments, allowing families to choose the structure that best fits their needs, and authorizes a “safe harbor” to protect low- and moderate-income households from being required to remit excess payments that could arise from changes in the number of qualifying children and marital status, and events affecting employment or income.
Reduce structural barriers to the CTC and other family tax credits by investing in effective, community-driven outreach efforts and providing adequate resources to the Internal Revenue Service (IRS) to improve customer service and operations.
The benefits of the CTC can only be fully felt when accessible. Unfortunately, not all families eligible for the CTC claim the credit. This disproportionately affects families with low incomes who may not have tax filing obligations and therefore may not know to file to receive the credit. Investing in robust efforts to increase awareness of the CTC is essential for equitable implementation and delivery of the credit. In addition to community-based outreach efforts, we encourage the Committee to provide and maintain dedicated resources to modernize the IRS, including the permanent establishment an accessible, simplified filing system (e.g. Direct File) and increased capacity for customer service. With additional resources provided through the Inflation Reduction Act (IRA), the IRS significantly increased its capacity and customer service during the 2024 tax filing season. Specifically, the IRS reported modernized and improved phone service – including improved phone service, more calls answered, faster response time, and more callback options – expanded in-person hours and help, additional support at volunteer tax filing sites, higher usage of the agency’s website, and an uptick in chat bot use. Maintaining such investments enables more taxpayers to engage and build trust with the government while accessing free services to accurately pay and file taxes.
Improve the Earned Income Tax Credit to support low wage workers.
The Earned Income Tax Credit (EITC) is a powerful tool to reduce poverty and boost wages for low wage workers and their families. In 2023, the credit kept 4 million people out of poverty. Families who receive the EITC primarily use the credit to pay for necessities like food, rent, clothing, and school supplies. In addition to supporting financial stability, the EITC is associated with health benefits across the lifespan. Previous expansions in the EITC have been strongly associated with a decrease in infants born with low birth weights among pregnant women eligible for the credit. This relationship is notable because low birth weight is damaging to the long-term health and developmental potential of children and costly to the health system, yet few medical interventions are available that effectively reduce the risk of low birth weight. In addition to benefits for infants, children in families receiving the EITC have fewer behavioral health problems, such as anxiety and depression.
ARPA significantly expanded the EITC for workers not claiming dependents – many of whom are noncustodial parent and caregivers. The maximum credit for these workers nearly tripled to just over $1,500, and, for the first time, younger workers (aged 19-24) and older workers (aged 65 and older) became eligible. As a result, the number of recipients without dependent children nearly doubled, providing this population with more than 5 times the total credit dollars compared to previous law in 2019. This change boosted incomes for eligible low-wage workers by an average of $823, helping them afford rent, groceries, and transportation to and from work.
As the Committee considers tax legislation, we encourage you to expand the EITC – specifically to restore benefit levels for workers without dependent children who currently receive minimal support or are left out altogether because of their age. In addition, we urge the Committee to consider increasing the narrow income limits for workers without dependent children (currently limited to $18,600 for single filers, and $25,500 for married filers).
Establish a minimum credit for unpaid caregivers.
Caregiving is some of the most important work performed in our country, but many caregivers are excluded from valuable work tax credits simply because their work is unpaid. Approximately 38 million family caregivers (11.5% of the population) provide an estimated $600 billion of care each year in America – all uncompensated by the traditional wage and salary model. Mothers providing unpaid care to minor children, parents, and spouses forego an average of $237,000 over their lifetime in compensation and retirement benefits. Providing a caregiver credit through the EITC, as proposed in the Worker Relief and Credit Reform Act of 2021, would make caregiving pay by providing a credit to those taking care of young children, aging relatives, or family members who are unable to care for themselves. We urge the Committee to consider this improvement that will support families and the caregiving economy – an essential component of our economy that often goes unrecognized and unpaid.
Do not pass tax cuts at the cost of other benefit programs for families.
As pediatricians, we are alarmed by threats to pay for the tax package by cutting critical public health and public benefit programs, including Medicaid and the Supplemental Nutrition Assistance Program (SNAP). Taking away health care and food benefits to pay for tax breaks for billionaires and corporations will widen inequities and harm the health and well-being of children nationwide. Moreover, cutting family tax credits like the EITC and Child and Dependent Tax Credit to fund improvements to the CTC would disproportionately harm children and families with low incomes, and undermines improvements.
As the Committee considers comprehensive tax reform, we urge it to target support to children and families with the lowest incomes. Expanding the CTC and EITC to support access for children and caregivers is a meaningful investment with the power to permanently cut child poverty, improve individual and community financial well-being, and promote health. However, it is not a solitary fix. We encourage the Committee to leverage opportunities to raise revenue through the tax code to invest in the care economy and other family support programs, like child care and nutrition, that support the health and economic mobility of families nationwide.
Sincerely,
Stephanie Ettinger de Cuba, PhD, MPH
Executive Director, Children’s HealthWatch