Joe Biden speaks during an event to mark the start of monthly Child Tax Credit (CTC) relief payments on July 15, 2021, in Washington. CTC expansion expired at the end of 2022, but Biden's budget proposal includes a fully-restored Child Tax Credit. (AP Photo/Evan Vucci, File)

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 proposal would expand the credit from $2,000 per child to $3,000 per child for children 6 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. Currently, if families don’t have a large enough tax burden, they don’t get the entire refund. 

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. Families don’t receive any tax credit for the first $2,500 they earn. After that, the credit phases in at only 15 cents on the dollar. 

The result is that families that may need the money the most are less likely to get it, CBPP reports. 

“For example, a single mom with two children, earning $15,000, receives less than half the credit amount of a similar family where a parent has a higher-paying job,” according to CBPP. “A family whose parent is unable to work in a year because, for example, they were laid off or an illness kept them from working receives no Child Tax Credit at all.”

Sarah Calame, a research assistant for CBPP, told the Daily Yonder in December that the current formula creates a special hardship in rural areas.

“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,” she said. 

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 0.4% 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 nine out of 10 low-income families were using the Child Tax Credit to pay for basic necessities and education.

The expansion of the Child Tax Credit during the pandemic was a bridge to opportunity, to hope, to a better night’s sleep for families across the country. For some families, it meant they might not have to choose between food and keeping the lights on. The expanded tax credit reduced poverty and strengthened families during the pandemic. We should return to what we know works to improve conditions for rural Americans who are working hard to get ahead.

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)

Whitney Kimball Coe is director of the Rural Assembly and vice president of national programs for the Center for Rural Strategies. Rural Strategies is a nonprofit, nonpartisan organization that also publishes the editorially independent Daily Yonder. Read the Daily Yonder’s statement of editorial independence.

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