What you need to know about the child tax credit as both campaigns embrace it

This week tax policy has gotten a star turn on the campaign trail.

Republican Vice Presidential candidate JD Vance floated the idea of more than doubling the amount of tax credits families can get from the federal government for each child.

“I'd love to see a child tax credit that's $5,000 per child, but you, of course, have to work with Congress to see how possible and viable that is," Vance said on CBS’s “Face the Nation” on Sunday.

“President Trump has been on the record for a long time supporting a bigger child tax credit, and I think you want it to apply to all American families,” he added, no matter their income.

Vice President Kamala Harris made the child tax credit the center of a campaign speech in Maryland on Thursday.

The Harris campaign says she would restore the COVID-era policy, and families with newborn babies would get a $6,000 tax credit the first year. And her running mate Gov. Tim Walz signed into law a state-level child tax credit in Minnesota that provides eligible families up to $1,750 per child, in addition to the federal credit.

Here’s a short guide to what the child tax credit is and what changes might be coming in the months ahead.

A history with a dramatic twist

For more than a quarter century, American families have gotten money from the federal government for each child in their family.

Under President Clinton in the late 1990s, the child tax credit gave middle and upper income families $500 per child in the form of a nonrefundable tax credit. The amount and the rules about which families qualify has changed in each presidential administration since then — currently, eligible families can receive up to $2,000 per child.

There was one huge, dramatic change that, though it was only in effect briefly, is still making political waves.

At the height of the pandemic, in 2021, Congress changed the child tax credit in substantial ways as part of the American Rescue Plan Act. “It made the credit larger, it made the credit available to families with low incomes regardless of their income or tax liability, and it made the credit available to families on a monthly basis,” explains Ashley Burnside, a senior policy analyst with the Center for Law and Social Policy, known as CLASP.

During this period, people could get as much as $3,600 per year per child. Since families didn’t need to earn a certain amount to qualify, 19 million kids in low-income families became eligible for the first time, Burnside says.

For each child age 5 or younger, for instance, some families got $300 per month deposited directly into their bank account.

The impact was profound — the child poverty rate dropped in half. “Parents spent their payments towards month-to-month costs — groceries, rent, bills — that help families meet their essential needs,” Burnside explains, citing surveys her organization did of low-income families during this time. “When families got these monthly payments, the food insecurity rates went down for households with children.”

Then when the expanded credit expired the poverty rate bounced right back up. Researchers found that “families reported having a harder time meeting month-to-month costs like rent and bills and affording nutrient rich foods that are more expensive,” Burnside says.

Of course, there were a lot of other relief programs happening at the same time, notes Anna Aizer, economics professor at Brown University. She and colleagues worked to tease out the effect of that period of a nearly universal, fully refundable child tax credit in a working paper published in June. They concluded that the child tax credit “likely improved child health and well-being in the short and long run, with greater impacts for poor children and modest or nonexistent effects for non-poor children.”

“Really, if we want to reduce child poverty, we know how to do it,” Aizer tells NPR.

Burnside, of CLASP, agrees. “I think a lot of people in America, both lawmakers and voters, have the view that poverty is this thing that we just cannot control — that just has to happen in our society,” she says. “But the reality is, we make policy choices as a nation every day that cause poverty to exist and to spiral for more families. And not investing in something like a child tax credit is one choice that we make that allows child poverty to continue to exist.”

Bipartisan support, usually

Congress recently came very close to expanding the child tax credit, but some key Republican Senators opposed the effort and it failed to become law. Vance, a Republican senator from Ohio, was not present for a vote on that bill, saying in the CBS interview that “it was a show vote” and would have failed anyway.

Professor Mariely López-Santana of George Mason University says Republicans blocking the most recent effort to expand the bill belies its bipartisan history. “I think it's quite possible that Republicans embrace a child tax credit because it can fit within the platform” and the message that Vance is putting forth that his party supports families, she says.

Even though Republicans generally don’t support as much spending on social programs, “this is a tax credit, and Republicans, when it comes to supporting different types of social programs, they actually have supported tax expenditure.” López-Santana thinks political polarization in a presidential election year has slowed what would otherwise be a policy with broad support.

The attention on this issue and its bipartisan history is encouraging to Burnside from CLASP. “It gives me hope that both sides of the aisle are talking about this and that — because of the [2021] expansion — voters and families see the value in a policy like this,” she says.

The details of any future expansion matters, notes Aizer, the economist. The key thing about the COVID-era expansion that had such a dramatic impact on child poverty is that it reached the lowest income families, and financial investment in poor children pays lifelong dividends in terms of their health and wellbeing, she says.

Vance on CBS said he would favor a credit that would be the same for all families of all income levels. “You don't want a different policy for higher income families, you just want to have a pro-family Child Tax Credit,” he said.

“I'm not sure we have the evidence that expanding this to the highest income households is going to generate the [same] kinds of benefits,” Aizer says. “But it'd be really expensive, and if you spend that money on this, there’s something else you're not spending it on.”