The Child Tax Credit, Labor Supply, and Poverty
In a recent publication, Bruce D. Meyer, nonresident senior fellow at AEI, and Kevin Corinth, executive director of the Comprehensive Income Dataset Project at the University of Chicago’s Harris School of Public Policy, examined the effects of proposed changes to the Child Tax Credit (CTC) on labor supply and poverty. Meyer and Corinth suggest that by eliminating the strong work incentives found in the previous CTC, the Build Back Better proposal would reduce employment by nearly 1.5 million workers and would diminish the plan’s impact on child poverty. They stress that even without accounting for reduction in work, the expansion would be less targeted to those in the bottom decile of annual income and achieve less poverty reduction per dollar spent on families with children than most other anti-poverty programs. Meyer and Corinth cite a report from the National Academies of Science, Engineering, and Medicine (NASEM) Committee that indicated positive evidence for the changes. However, they believe this report failed to account for the consequences for employment and poverty of eliminating the prior tax law CTC, which had a strong work incentive.