New data from the Census Bureau has brought the impact of the Tax Cuts and Jobs Act (TCJA) on low-income families into clearer focus. While most of the tax cuts focused on high-earners and corporations, ordinary American families also benefited through an expanded and modified Child Tax Credit (CTC):

  • The basic per-child CTC doubled in value from $1,000 to $2,000;
  • The earnings threshold for refunding the CTC was moved down to $2,500 from $3,000;
  • And the maximum refundable credit was increased from $1,000 to $1,400 and indexed to inflation.

Overall, estimates from the Joint Committee on Taxation shows CTC expenditures more than doubled, growing from $54 billion in 2017 to over $120 billion in 2018. While the general CTC expansion was offset by the elimination of the personal exemption for many families, the refundable portion generated significant net gains for families lower down the income ladder. In fact, based on estimates from the Current Population Survey, outlays on the refundable portion of the credit increased by roughly $10 billion per year, from $16 billion to $26 billion. This is a substantial increase in aid to low-income families and children. To put the size of this increase into perspective, $10 billion is about 60 percent of the $16 billion spent annually on Temporary Assistance for Needy Families, the nation’s primary cash-based social insurance program for families.

The Supplemental Poverty Measure (SPM), which accounts for income transfers in its calculation, declined from 13 percent in 2017 to 12.8 percent in 2018.[1] Based on my analysis of the Current Population Survey, the above changes to the refundable portion of the Child Tax Credit brought more than 750,000 additional persons out of poverty as measured by the SPM in 2018, relative to 2017. Almost half of the individuals lifted from poverty in 2018 were children. The number of families receiving a refundable credit grew 25 percent, and the typical benefit that these families received increased by about one-third.