Among the NAE’s public policy priorities outlined in “For the Health of the Nation” are commitments to “strengthening marriages, families and children” and “seeking justice and compassion for the poor and vulnerable.”[i] Two little-known provisions of our tax code contribute significantly to these goals: the Child Tax Credit and the Earned Income Tax Credit. They can be made even more effective.
The NAE affirms that “the family is central to God’s vision for human beings and for human society” and that “the family is central to life together as diverse people in society.”[ii] While families themselves, along with their churches, bear the primary responsibility for nurturing family life, the NAE recognizes that “other social institutions, including government, play important roles in encouraging healthy family life and the well-being of children.”[iii] Tax and other social policies “concern not only individuals but can significantly affect families.”[iv] We are thus committed to working “for measures that strengthen the economic viability of marriages and families, especially among the poor.”[v]
The Child Tax Credit
The Child Tax Credit provides financial assistance to parents who are raising children. It was first proposed in 1994 as part of the Republican Party’s Contract With America. It became law three years later as part of a bipartisan budget agreement. In subsequent years the credit was expanded as part of the Tax Cuts and Jobs Act of 2017. In March, 2021 the tax credit was temporarily increased for 2021 to $3,000 per eligible child ages 6-17, and $3,600 per child ages 0-6. The entire credit can be refunded to taxpayers who, after applying the credit, do not owe taxes. Previously, only $1,400 of the credit was refundable. Starting in July, families receive the credit in monthly installments of $250 per child ($300 for children ages 0-6).
If the latest improvements are not made permanent, the credit will be reduced to $2,000 for 2022-2024, and to $1,000 in 2025 and beyond. The full credit is currently available to families making up to $150,000 per year or to single parents making up to $112,500 per year..
Beginning July 15, eligible families will receive six monthly payments of $250 per child ages 6-17, and $300 per child ages 0-6. For those who filed a 2020 tax return, the payments will be made automatically. Other families can register at the IRS portal for non-filers.
The Child Tax Credit has been a financial blessing to many families. However, as currently constituted, after 2021 the full benefit will only be received by middle and upper income families, since parents who owe no taxes do not receive the nonrefundable part of the credit. The credit could be improved both by making permanent the temporary increases and full refundability approved for 2021, and by better targeting it to families of modest means.
An important feature of the child tax credit is that it helps families directly, allowing them to keep more of their money rather than filtering assistance through government agencies and programs that may compete with private charities and impose eligibility criteria that religious parents cannot support.
Both Republicans and Democrats have proposed further improvements to the Child Tax Credit. The NAE encourages efforts to strengthen support for American families and urges that this support be targeted to low-income families who need it most.
The Earned Income Tax Credit
The Earned Income Tax Credit (EITC) was first enacted in 1975. The credit grew out of a debate over the best way to assist low-income Americans while incentivizing work. It has enjoyed broad bipartisan support as it aids the poor while rewarding work. It is now the largest federal anti-poverty initiative. Notably, like the Child Tax Credit, it provides support directly to beneficiaries rather through government-funded agencies and services. The credit slowly phases in and out, avoiding benefit cliffs that discourage work.
The EITC is particularly beneficial to families with dependent children. Prior to 2021 it provided only a tiny benefit of $530 or less to childless low-income adults, who were the only workers who earn incomes above the poverty line, but are then taxed back into poverty. It was not available at all to workers under 25 or over 65. For 2021, the EITC has been temporarily expanded to cover most workers who are 19 or older, and the maximum benefit has been increased to $1,502. [vi]
Reforming the EITC to make these improved support levels and eligibility criteria permanent could lift millions of low wage workers out of poverty while enabling them to gain valuable work experience that could lead to higher incomes. This would be particularly helpful to minority workers who represent a disproportionate share of low wage employees.
[i] For the Health of the Nation, https://www.forthehealth.net (Washington, DC: National Association of Evangelicals, 2018).
[ii] Ibid, p. 13.
[iii] Ibid, p. 13.
[iv] Ibid, p. 30.
[v] Ibid, p. 31.
[vi] Congressional Research Service, The “Childless” EITC: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2), updated May 3, 2021
Download a PDF of this Child and Earned Income Tax Credits backgrounder.
Read the NAE Statement on Supporting Families with Children and Low-income Workers.