Unless Congress acts, this will be the last Tax Day parents benefit from expanded Child Tax Credit

April 18, 2022 6:00 am
Family in the kitchen

(Jimmy Dean | Unsplash)

Most parents filing taxes this year are benefitting from improvements to the Child Tax Credit that help make it easier to make ends meet. These improvements lifted millions of children out of hardship and slashed poverty rates — but the failure of Congress to take action to continue the expanded credit places families at risk of falling behind or into poverty. 

Raising children is hard work, and it’s even harder when families have to struggle to get by. The temporary improvements to the Child Tax Credit (CTC) included in the American Rescue Plan Act made a significant difference for families and kids by making it easier to afford basic household expenses. Those improvements gave the biggest boost to families who have been harmed by a tax system largely designed to benefit the wealthy and powerful. 

The temporarily-expanded CTC was especially important in closing gaps in child well-being between white children and children of color – gaps that are rooted in historical and present-day racial discrimination in Wisconsin’s schools, health care system, housing and job market. 

The improvements to the CTC include:

  • Increasing the maximum credit amount, from $2,000 to $3,600 for children under age 6, and to $3,000 for children age 6 to 17 (including 17-year olds for the first time). 
  • Removing a provision that blocked parents with low incomes or no incomes from getting the credit. This change meant the parents of 366,000 Wisconsin children got the full credit who previously did not. Allowing parents with the lowest incomes to get the full amount of the credit makes an especially significant reduction in poverty for families of color. 
  • Receiving part of the credit in advance in the form of monthly payments, instead of in a lump sum at the end of the year (unless parents opt not to). This allows parents additional flexibility in using the credit to pay for ongoing expenses, like groceries.  

Although parents filing their taxes this year are getting a bigger tax cut because of the CTC, Congress has failed to extend these critical improvements past tax year 2021. Unless Congress acts, parents and kids will be missing out on these investments into the future. 

We can already see the harm that Congressional inaction is inflicting on families. The child poverty rate spiked in January after the advance monthly CTC payments ended, jumping from 12.1% to 17%, the highest rate seen since the end of 2020. Living in poverty can result in detrimental health, social and economic effects that follow a child for an entire lifetime.

Thanks to research by the U.S. Census Bureau, we know that parents spend the credit to meet the basic needs of their families, including food, rent, and utilities. Parents are in the best position to decide how to spend their family budget. 

It’s not too late for Congress to act, so that parents filing their taxes next year will benefit from an expanded CTC. One possibility would be to lift the CTC improvements out of the Build Back Better package and pass those improvements on their own, rather than part of a larger bill. However it happens, Congress needs to make it a high priority to invest in our children. Doing so will strengthen families and communities for years down the road, reduce hardship, and help close racial gaps in economic well-being.


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Tamarine Cornelius
Tamarine Cornelius

Tamarine Cornelius is a research analyst at the Wisconsin Budget Project.