Policy Backgrounders

The Child Tax Credit (CTC)

October 12, 2021

Increases and liberalizations of the Child Tax Credit (CTC) are among the most controversial provisions in the current budget reconciliation bill. The CTC provision is a significant part of the cost of the bill; in fact, assuming that it is intended to be made permanent, it is one-third of the total cost, and so must be an important consideration in the debate on the bill as a whole. The CTC is a part of current law, but the increases in benefit levels and liberalizations—such as removing the earnings requirement (making the benefit fully refundable) and paying the benefits out in monthly installments that would be extended in the reconciliation bill—are scheduled to expire at the end of this year, and so a resolution of this question is urgent. Furthermore, the reconciliation bill would extend those provisions, but only for four years, not permanently, which raises other issues. And finally, the mechanism through which the credit is distributed had never been tried before it was put into effect on short notice in the middle of this year. As a result of all of these issues, the CTC reconciliation provisions are debated hotly.