Why The Design of A Larger Child Tax Credit Matters
“The 2025 tax debate saw a number of proposals from Democratic and Republican policymakers to increase the value of the Child Tax Credit and reform a number of its central elements. Various Republican policymakers, who held control of both chambers of Congress during this debate, proposed a maximum credit of close to $5,000 per child, but with wide variations in credit design. Despite these proposals, the 2025 tax debate culminated with the passage of H.R.1, or the “One Big Beautiful Bill Act” (OBBBA), in July 2025, which only modestly changed the Child Tax Credit. OBBBA raised the maximum credit from $2,000 to $2,200 per child and permanently indexed it to inflation. However, it left untouched the elements that tie a family’s credit amount to their income, with children in low-income families continuing to benefit less from this policy than those in middle- and higher-income families.
Calls for a more meaningful expansion of the Child Tax Credit are likely to resurface and policy design decisions will determine who benefits and to what degree. This brief draws on proposals that emerged in the recent tax debate to examine how different credit designs could either narrow or exacerbate inequities in the value of the Child Tax Credit between children in families with low incomes and children in families with more. We first look at differences in the OBBBA Child Tax Credit for children across the family income distribution. We then estimate how a larger maximum credit of $5,000 with elements of recently proposed designs—from universal access to different adjustments to the minimum earnings requirement, phase-in structure, and refundability cap—affects who would benefit. We also identify differences in the share of children who would be “left behind” from receiving the full credit under various designs.”
Read more at Center for Poverty and Social Policy.