As the Trump-era tax cuts expire in the coming years, there are opportunities to take advantage of and improve the child tax credit. In a report published by the People's Policy Project, a collectively funded leftist think tank, founder Matt Bruenig proposes to reform state-level tax credit programs (both CTC and EITC) to counter the exclusion of low-income children from federal tax credits. This is due to the increasing evidence that the cost of raising younger children is harder for parents to pay. The Tax Code establishes mandatory annual adjustments to certain tax items based on inflation, so it is important for taxpayers to be aware of this information.
Last year, Massachusetts converted two existing tax deductions for dependents into fully refundable child tax credits, and this year the state's Republican governor proposed cuts to the EITC and its elimination of the tax-filing “head of household” status. However, the Biden administration and progressive tax experts have advised Democrats in Congress not to consider any labor requirements when expanding the child tax credit in reconciliation. The American Rescue Plan extended the entire dependent child tax credit permanently to Puerto Rico, and increased it and expanded its coverage to better help families who care for children. Joe Manchin and his Democratic colleagues have discussed whether recipients of tax credits should be required to work, while Rodríguez has been encouraging states to allow immigrant workers with individual taxpayer identification numbers (an alternative to Social Security numbers) to collect state benefits from the EITC.
Eight states currently allow this. Advocates also see opportunities to push for administrative improvements in the IRS to make the tax filing process easier and less expensive for families. Since the deduction doubled due to tax reform, almost 90% of taxpayers file their returns using the standard deduction. Most eligible families didn't have to do anything to receive tax credit payments; the IRS sent them to taxpayers because they were eligible under previous income tax returns. It is important for taxpayers to be aware of how they can maximize their child tax credit in 2023. The People's Policy Project identified 14 states and Washington, DC, that have full control of the Democrats and could be more easily persuaded to make progressive reforms in tax policy.
U. Tilly, of the Children's Defense Fund, recognizes that 60 votes will be needed to do anything about the child tax credit by the end of the year.