The child tax credit keeps getting smaller
Timothy P. Carney
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Congress increased the child tax credit to $2,000 beginning Jan. 1, 2018. While some folks objected that this was a special-interest handout to parents, expanding the child tax credit was really just a makeup for folding the personal and dependent exemption into a larger standard deduction.
The dependent exemption, which no longer exists, was effectively a 0% rate. Tax brackets are all indexed for inflation. The personal and dependent exemption was indexed for inflation. Yet the child tax credit is not indexed for inflation.
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The $2,000 child tax credit that went into effect in 2018 is now worth less than $1,700 in 2018 dollars. Put another way, the child tax credit has lost 15% of its value since it was created.
While the cost of living for little people keeps increasing, the tax code’s accommodation of little people doesn’t increase. In effect, the tax code is becoming more anti-person every year.
There’s another aspect to this: The child tax credit phases out for rich people. But the threshold for “rich people” hasn’t been indexed for inflation. That means that people whose income (measured in purchasing power) wasn’t rich in 2018 are now considered rich, and thus, they lose some or all of their tax credit.
America has record-low birth and marriage rates, and every year, we are letting the tax code get more and more tilted against families and tilted in favor of unmarried and childless people.
I don’t think the government should subsidize families, but the tax code should treat humans, even little humans, as humans. Justice demands that Congress act today to reset the child tax credit to the same inflation-adjusted value it had in 2018 (which would be about $2,400), and then permanently index it to inflation.