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Tax Credits and Child Outcomes: Lessons from the U.S., U.K., and Canada

Many studies of tax credits similar to the Child Tax Credit find evidence linking the additional income to improved health and educational outcomes during childhood, as well as increased educational attainment, employment, and earnings in young adulthood. www.nber.org/papers/w33822

nber.org

Founded in 1920, the NBER is a private, non-profit, non-partisan organization dedicated to conducting economic research and to disseminating research findings among academics, public policy makers, an...

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The refundable portion of the Child Tax Credit lifted 1.3M children above the poverty line in 2025, according to the latest Census data. Expanding the full credit to children in families with low and moderate incomes would lift even more children above the poverty line.

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To Strengthen Economic Security, Policymakers Should Expand the Child Tax Credit to the 19 Million Children Who Receive Less Than the Full Credit Amount

Currently, more than 1 in 3 Latinx children miss out on the full $2,200 Child Tax Credit simply because their families' incomes are too low. That's over 6 million children to whom policymakers deny the full benefit of the credit. www.cbpp.org/research/fed...

cbpp.org

The Child Tax Credit helps make raising children more affordable, and its full value should be available to families with lower incomes.

Policymakers interested in improving economic security for Latinx families with low and moderate incomes should expand the Child Tax Credit to provide children in families with lower incomes with the full $2,200 credit.

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The Latinx community plays an indispensable role in shaping the public life of our country. Yet, amidst a broad affordability crunch and the Admin’s cruel detention and deportation machine, Latinx families are under increasing economic strain.

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During Latinx Heritage Month, we celebrate the rich history, culture, & contributions of Latinx and Hispanic communities. We also recognize that policymakers should take action to provide these communities w/ tangible support. One clear policy step: Expand the Child Tax Credit.

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We’ll have more analysis on the Treasury’s proposed rule in the coming weeks.

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A U.S. District Court found the IRS unlawfully shared confidential taxpayer data w/ Dept of Homeland Security. This rule would give the IRS more sensitive information about tax filers, which may drive down tax filing among immigrants & lower tax revenue.

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The rule wld require all filers claiming the refundable part of one of these tax credits to attest to being a U.S. citizen or having a “qualified” immigr status (not an easy eligibility standard to understand) on their tax return, increasing the potential for filer & IRS errors.

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And if Congress thought the 1996 restrictions applied but were being improperly ignored, it could have rewritten the provision in any of the subsequent tax bills enacted over the last 30 years, including the law passed in 2017 or 2025, which both addressed refundable credits.

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Congress narrowed eligibility for credits for immigrants & kids who are U.S. citizens w/ immigrant parents most recently in the 2025 Republican reconciliation law. If it intended to impose an even harsher restriction, it could have legislated that change.

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Congress has passed multiple bills affecting immigrants and tax credits since then, but has never indicated that it thought the restrictions already in the 1996 law applied to tax credits.

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Other provisions of the 1996 law affected refundable credits, especially the EITC. If Congress had wanted to deny these credits to immigrants, it easily could have said so.

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The 1996 law defines “federal public benefits” to include certain forms of federal assistance, e.g., food assistance or housing benefits, and “any other similar benefit.” But tax credits are different from these benefits in key, legally distinguishable ways.

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The Administration claims this was Congress’s intent in 1996, but no prior D or R admin has interpreted the law that way.

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The rule would affect access to these tax credits: Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Tax Credit, & the adoption tax credit. Future rulemaking is expected to similarly restrict the Saver’s Match Credit.

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Our estimates, by contrast, count everyone in a family that loses access to the credits. Data limitations & changing immigration statuses mean our estimates are rough. But ignoring the impact on the children involved is clearly wrong.

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The proposed rule provides an estimate of people affected but it raises serious questions – that estimate appears to include only tax filers, when in fact, everyone in the family is affected by the loss of the tax credit.

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The way the rule would work is that even U.S. citizen children for whom both of their parents are in one of these immigration categories would lose access to the refundable portion of the EITC and CTC. (The family of a single parent in one of these categories would lose access.)

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Under the proposed rule, only a subset of immigrants with lawful immigration statuses would be eligible for tax credits, leaving out many people living/working lawfully in the U.S., including: [alt text: bulleted list of immigration statuses left out of credits under the rule]

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Treasury’s proposed rule includes a misguided reinterpretation of a 1996 law & asserts [SJ5.1]that the refundable portion of various tax credits will be covered by the law’s harsh restrictions. That’s not what Congress said, nor did its debates ever suggest restricting tax credits.

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Taking away the tax credits would harm people who are immigrants & their families, making it harder for them to afford the basics. Studies of tax credits find evidence linking add’l income for low/moderate inc families to short- & long-term gains for children.

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public-inspection.federalregister.gov

Treasury proposed a rule that wld take away tax benefits f/ ppl w/ a lawful status, incl taking eligibility for the refundable part of the CTC &/or EITC away from ~1M ppl, incl hundreds of thousands of US citizen kids, upending 30 yrs of precedent public-inspection.federalregister.gov/2026-16985.pdf

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As we previously noted, the EITC is a proven tool for helping low- & moderate-income working fams w/ kids afford the basics. The EITC alone cannot solve families’ affordability challenges, but it can help. McDonald-Rivet’s bill takes an important step forward.

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Tax Credits and Child Outcomes: Lessons from the U.S., U.K., and Canada

This could make a difference across kids’ lifetimes. Many studies of the EITC & similar tax credits for fams w/ kids find evidence these credits improve health & edu outcomes in childhood, & increase edu attainment, employment, & earnings in young adulthood. www.nber.org/papers/w33822

nber.org

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Older children living in fams with children age 0-3 would also benefit from their family receiving up to $5,500 per young kid. Overall the # of children < age 18 in fams w/ incomes below the poverty line would fall by about 700k kids, or a 7.3% reduction, in 2026.

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chuckcbpp.bsky.social @chuckcbpp.bsky.social · 16/04/2026

Additional analysis on Rep. McDonald-Rivet’s #EITC bill for low-income working fams w/ kids <4 – the expansion would reduce the # of kids age 0-3 experiencing poverty by more than 400k kids – a dramatic 19.5% reduction, @centeronbudget.bsky.social estimates for 2026.

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Reposted by Kris Cox

Going fwd, the Trump Admin plans to dramatically cut the number of audits Biden planned. Today House Republicans take a step toward that by proposing a destructive $1.4B enforcement cut. Congress should not signal that tax cheats can proceed w limited oversight.

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Reposted by Kris Cox

chuckcbpp.bsky.social @chuckcbpp.bsky.social · 16/04/2026

Fewer sophisticated auditors means that fewer wealthy people will be audited. See below how audits of wealthy people plummeted since 2010 when Republicans began their latest round of gutting the IRS.

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Reposted by Kris Cox

chuckcbpp.bsky.social @chuckcbpp.bsky.social · 16/04/2026

Currently, *the IRS has fewer auditors than it has had since the 1950s* – not a typo! – because Republicans have previously gutted the enforcement budget.

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Reposted by Kris Cox

chuckcbpp.bsky.social @chuckcbpp.bsky.social · 16/04/2026

House Republicans proposed another reckless cut in the IRS budget. The proposed 9% cut would take the IRS budget to 44% below its 2010 level. This gutting of the IRS is a betrayal of honest taxpayers. It should be rejected out of hand

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Pairing EITC expansions that provide targeted help to low-inc families with a Child Tax Credit that reaches all low-income children is one approach that can markedly reduce child poverty.

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For the same cost, an EITC expansion can get more help to low-inc kids b/c of its targeting than a CTC expansion. Still, neither the EITC nor the CTC provide any help to kids w/ parents who are out of work in a given year, incl those laid off or ill – or those displaced by AI.

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The EITC targets more help to fams w/ low & moderate incomes than the CTC, which benefits most children, though 19M kids don’t receive the full credit b/c their incomes are too low.

Republican Megabill Tax Provisions Are Skewed to the Rich, Fail to Deliver for Families, and Are Fiscally Irresponsible

This bill stands in stark contrast to the priorities in last year’s Republican megabill, which included large tax breaks for high-income households, deep cuts in SNAP and Medicaid, and a very modest CTC increase that largely leaves out low-income children. www.cbpp.org/research/fed...

cbpp.org

Instead of changing course and prioritizing people with low and moderate incomes as Republicans’ campaign rhetoric about supporting hard-pressed working families suggested, the new law again gives eno...

Childcare Use and Expenses Among Families of Different Income Levels - Federal Reserve Bank of Chicago

The EITC alone cannot solve families’ child care affordability challenges, but it can help. Families with incomes close to the poverty line who pay for child care spent an average of about 17 percent of their income on care in 2021. www.chicagofed.org/publications...

chicagofed.org

As part of the Chicago Fed’s Spotlight on Childcare and the Labor Market, a targeted effort to understand how access to childcare can affect employment and the economy, we use data from a national sur...

Under the McDonald-Rivet bill, a married couple with two children would qualify for an additional $5,500 per child under 4 if their incomes are between $18,290 and $31,160, after which both the EITC and young child supplement would phase-out.

The bill focuses on young children, providing as much as $5,500 per young child to families who qualify. The young-child focus recognizes that parents of young children often face reduced earnings due to caregiving responsibilities and high child care costs.