Child Tax Credit offers little relief to the poor in GOP plan

WASHINGTON — The Senate Republicans’ tax bill would leave millions of poor families with only partial access to a tax credit that conservatives have touted as a critical policy tool for alleviating poverty.

The measure Senate Republicans hope to pass this week expands a tax credit for parents, boosting it from the current maximum of $1,000 annually per child to $2,000 annually per child.

But despite urging from some conservative Republican senators, the bill would largely limit the benefits of its more robust Child Tax Credit, or CTC, to families who pay income taxes.

That means the new increase would be almost entirely unavailable to working parents who only pay payroll taxes, which fund Medicare and Social Security, but do not make enough over the year to pay income taxes.

The average annual salary of the family who would fail to qualify for the full increase in the benefit is $25,000, according to the Center on Budget and Policy Priorities, a left-of-center think tank.

While the plan would leave these poor families out of the full CTC, it would also extend it to some middle-class and uppermiddle class families. Under current tax law, CTC’s benefits start declining once families make more than $110,000 annually. The latest Senate bill would expand eligibility to families earning up to $580,000 annually for married families with two children.

The upshot is that families in the middle and toward the top of the income distribution stand to gain significantly more from the CTC expansion in the GOP bill than the working poor. For example, a single mother with two children working a minimum-wage job would see her CTC benefit go up by $75 under the GOP bill. By contrast, a family with two children earning $500,000 annually would see its benefit expand by $4,000, the Center on Budget and Policy Priorities said.

Two Republican senators, Marco Rubio, Fla., and Mike Lee, Utah, have pushed for extending the credit in a way that would include low-income parents who don’t owe any income tax and still have a payroll tax burden, which is equal to 7.65 percent of income (the employer chips in an additional 7.65 percent). But it appears unlikely the final bill will include that expansion.

Conservatives are not hiding their frustration with the current Senate bill. “It needs to be equal opportunity tax relief,” said April Ponnuru, a senior adviser at the Conservative Reform Network. “There are lots of hardworking Americans out there who deserve a tax cut. If conservatives want to stand for tax relief, how can they ignore the main tax that most families pay?”