The Child Tax Credit Should Promote Work and Marriage

Year-end flurries of legislative activity are a congressional tradition, and this year is seeing a supercharged version. With the clock ticking on Democratic control of Congress, many are encouraging lawmakers to revive President Biden’s expanded child tax credit, which sent $250 per child, plus a little more for young children, to nearly all parents each month for the last half of 2021. 

The impulse behind this proposal is laudable—progressives see expanding the child tax credit as a means of reducing rates of child poverty and giving parents a little more financial room to breathe. Unfortunately, some of our friends on the right are reflexively opposed to the child tax credit (CTC). The Wall Street Journal, whose editorial board has opposed pro-family tax reform as “social engineering,” recently ran an op-ed calling the CTC a “failed experiment.” The Journal seems to prefer that policymakers stick with a 1980s-style playbook: lower taxes, less regulations, and entitlement reform. 

But that agenda offers nothing to millions of working- and middle-class families who are struggling to cover the costs of raising the next generation. An improved child tax credit, especially one targeted at parents of young children, could play a crucial role in strengthening the financial foundations of family life for working- and middle-class families across the country. 

Perhaps the devotees of limited government haven’t noticed that marriage and family life are in deep trouble, especially in working-class communities that have seen dramatic declines in family stability and marriage rates in recent decades. Meaningful economic support for family life, even if it doesn’t result in higher birth rates, makes a statement about what government should be for: alleviating the pressures facing those raising the next generation. As childlessness becomes more prevalent, the case for public subsidies for parents grows even stronger. 

Too many on the left do not appreciate that a Biden-style credit poses its own problems. Ending poverty isn’t as simple as sending a check. This can have its own perverse cultural consequences, as the legacy of the Aid to Families with Dependent Children program shows. A child benefit that has no connection to work can reinforce two troubling dynamics. 

As AEI’s Nick Eberstadt has pointed out, the share of men without any connection to the labor force has been on a slow upward climb over the decades. Giving families unconditional cash would make men even more superfluous. Too generous a child benefit for families without a worker reduces the necessity of having another parent in the home. New research from Alaska, which provides its citizens with an annual dividend, indicates that a universal benefit does boost fertility rates, but predominantly among unmarried women. 

We also need to beware getting back in the game of giving cash to families who are doing nothing to support themselves financially, a pattern that was common before welfare reform in 1996. It is good for children to grow up in families with some real, ongoing connection to the workforce. Re-introducing a family-work disconnect sends the wrong message to kids about the legitimate connection between paid work and family life. 

Even well-intentioned federal policies can have unintended effects. Our welfare regime, in both the tax code and the social safety net, too often penalizes doing the right thing. Take, for example, a hypothetical single mother making $20,000 a year. By herself, she would be eligible for Medicaid, which covers pregnancy-related services and preventative services for children, without co-pays or cost-sharing. If she were to marry her children’s father, who makes a hypothetical $30,000 a year, their combined income would make the household ineligible for Medicaid coverage; their health insurance premiums would increase or they would have to pay out of pocket for medical care. Similarly, that same cohabiting couple, making $30,000 and $20,000 as individuals, would be forced to pay nearly 9 percent of their household income in higher taxes were they to marry. 

We know from empirical research and ethnographic interviews that these marriage penalties contribute to the decline of marriage among poor and working-class families. Simply expanding the CTC would be a missed opportunity. For conservatives to support a child benefit, it must be pro-work and pro-marriage, something that the Biden administration's 2021 expansion did not do.   

The strongest legislative proposal on offer, Sen. Mitt Romney’s Family Security Act, is pro-work and pro-marriage. It collapses some of the child-related tax provisions into a single benefit with an achievable income requirement, allowing the Earned Income Tax Credit to function as something closer to a straightforward supplement for low-wage workers. Because the EITC currently features steep marriage penalties, the Romney proposal would remove many government-created economic barriers to marriage. 

There are other good proposals on offer—American Compass’s Family Income Supplemental Credit would offer a social insurance approach very similar to that of the Romney plan, including a 20 percent increase for married couples. Sen. Marco Rubio and Sen. Mike Lee, who have long been the CTC’s staunchest champions in the Republican caucus, would like to see the credit made more generous without removing its pro-work elements. 

These proposals would be improvements over the status quo. But Congress will need to start negotiating soon about the future of the CTC. Without additional action, the expansion of the tax code’s key pro-family provision—which  was passed in the Trump administration—will lapse in 2025. Families will go from being able to deduct $2,000 per child on their federal income taxes to $1,000—a significant tax hike for middle-income families. 

It seems unlikely a lame-duck deal will be struck on the CTC, leaving it to the next Congress to work through complexities and trade-offs in getting fiscal support to working-class families. A middle ground—bringing work and marriage into an approach that recognizes the need for supplementing the income of working- and middle-class families struggling to raise their families—should unite policymakers on both sides of the aisle who want to claim to be pro-parent.

Patrick T. Brown is a fellow at the Ethics and Public Policy Center.

W. Bradford Wilcox is the director of the National Marriage Project at the University of Virginia and nonresident senior fellow at the American Enterprise Institute. 

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Original image by Anastasia Shuraeva on Pexels licensed via Creative Commons. Image cropped.