Advocacy: Child Tax Credit back in the mix as Biden releases budget 

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President Biden’s proposed budget includes a fully-restored Child Tax Credit, which could have significant implications for rural families if passed.  

Both the Child Tax Credit and the Earned Income Tax Credit were expanded temporarily under the American Rescue Plan but those expansions expired at the end of 2022. 

The Rural Assembly has championed the permanent expansion of both credits, which disproportionately benefit rural communities, where there are more low-income workers, less access to services, and higher rates of child poverty. 

What is Biden proposing? The budget would expand the credit from $2,000 per child to $3,000 per child for children six years old and above, and to $3,600 per child for children under six. 

It would also permanently reform the credit to make it fully refundable. 

Why it matters:  Under the current law, an estimated 3 million children living in rural America will not be eligible for the full $2,000 Child Tax Credit, according to the Center on Budget and Policy Priorities. 

The families and children are not eligible because the family income is too low, said Sarah Calame, research assistant for the center, told the Daily Yonder in December. 

“The current Child Tax Credit leaves out children across the country, but leaves out sort of a larger share of children in rural areas due to disparities in pay between rural and urban areas,” Calame said. “So as the credit is currently set up for low-income families, the amount of credit you get sort of increases as your earnings increase. So because of that aspect of the credit design, it means that because pay is generally lower in rural areas, there are more kids who are left out of getting the full $2,000 per child under the current Child Tax Credit.”

Does the Child Tax Credit contribute to inflation? A letter from more than 200 economists to Congress in December says the Child Tax Credit, at under .4 percent of GDP, is too small to “meaningfully increase inflation, but it will help families meet rising costs.”

“Extending the expanded Child Tax Credit is one of the easiest, most effective, and direct tools currently at our disposal to help families deal with the impact of inflation on family budgets,” they wrote.

How did families use the credit in 2021? The Center on Budget and Policy Priorities found in 2021 that 9 out of 10 low-income families were using the Child Tax Credit to pay for basic necessities and education.

Whitney Kimball Coe, director of the Rural Assembly, wrote about the national and local impact of the CTC expansion, calling it a “bridge to opportunity, to hope, to a better night’s sleep…they mean that families might not have to choose between food and keeping the lights on. They mean childcare, long-overdue home repairs, that expensive broadband connection.” 

What about the Earned Income Tax Credit? The proposed budget also includes making the expansion of the Earned Income Tax Credit for childless workers permanent, which the White House says would help pull low-paid workers out of poverty. (Learn more about the impact of EITC on rural communities in this from the Rural Assembly)

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