Senators Mike Lee and Marco Rubio are proposing an amendment to the Republican tax overhaul that would increase the child tax credit for low-income and many middle-income families.
The child tax credit reduces the tax bill for American taxpayers with children. Under current law, families get a credit of up to $1,000 per child. The Senate bill would raise that to $2,000.
This tax credit is the key to reducing the tax bills for many Americans. Even though the GOP tax bills double the standard deduction, they would eliminate the personal exemptions that lower tax bills for many families. But even though the current tax bill doubles the child tax credit, it wouldn’t lower taxes for many Americans who do not earn enough to have a federal income tax liability.
These lower-income Americans still pay taxes, in the form of Medicaid and Social Security payroll taxes. But because their income is too low to incur income tax liability, a standard tax credit does not ease their tax burden.
Lee and Rubio would expand the child tax credit by allowing it to be fully refundable against payroll taxes. In addition, they would index the tax credit to inflation, which would mean it would rise as price levels rise. This prevents the credit from losing its value over time.
This expanded child tax credit would be paid for by setting the corporate tax rate at 22 percent, a substantial cut from the current 35 percent but above the Trump administration’s 20 percent proposed rate.