Senate plan to increase child tax credit falls short for Maine’s most vulnerable children

The Senate Republican tax plan fails to offer meaningful benefit to Maine’s working families with children. The plan’s signature change for working families, a change to the refundable child tax credit, is being pushed as “relief for hardworking families” —but as with so much of the bill, tens of thousands of low-income families are being overlooked for the benefit of the wealthy.

The change in the Senate bill fails to address the fundamentally unfair way in which the child tax credit is currently applied, meaning that a $1,000-per-child increase in the credit does not, in fact, do much at all for low-income children in Maine. Instead, children in the lowest income working families around the state would receive only a $75 benefit from the change.

In fact, much of the benefit of the child tax credit (CTC) will go to the wealthiest families in Maine. Currently, the CTC begins to phase out for couples earning over $110,000, but the Senate plan would increase this threshold to $500,000 per couple. That means tens of thousands of upper-middle class children will be added to the program, even as the poorest children see little extra benefit. In other words, the proposal offers maximum help to the children who already have the best life chances, and neglects those who need the most help.

The child tax credit is a “partially refundable tax credit,” meaning that the tens of thousands of Maine families who earn too little to pay federal income tax can’t claim the full value of the credit. These families receive only a partial refund on their taxes, which is capped at 15% of their income over $3,000 (the Senate proposal would lower this minimum threshold slightly to $2,500). Not only do these families *currently* receive less than the CTC’s full value, but the proposed increase will also be reduced due to the partial refundability of the credit.

  • For example, a single mother with two children working part time or seasonally around her kids’ child care schedules earns $14,500. Based on her earnings, her total refundable credit under current law is capped at $1,725. Under the Senate bill, her refundable credit would be $1,800, a token increase of just $75.

To make matters worse, the Senate proposal explicitly caps the total refundable value of the credit at $1,100 per child in 2018. As a result, the Center on Budget and Policy Priorities estimates that the poorest 29,000 children in Maine would see very little benefit ($75 or less) from an increased CTC, while an additional 55,000 would see less than the full $1,000 increase. In other words, a total of 85,000 children, or 38% of Maine’s children, will not qualify for the $1,000 per child increase.

  • For example, a married couple with two children earning $24,000, would appear to qualify for a total refundable credit of $3,225 under the Senate proposal (up from their current $2,000). But because the bill would cap refundability at $1,100 per child in 2018, the family would benefit by only $100 per child ($200 total) next year.

The value of additional resources for children living in or near poverty is immense. Real reform of the CTC has the potential to transform the lives of tens of thousands of children by allowing them access to books, school supplies, clothing, food, medicine, and shelter as well as covering the cost of child care for working parents. This proposal falls well short. Far from being a much-needed respite for hard-working Maine families, the changes to the CTC mimic the basic flaws of the larger plan—it fails to provide any meaningful benefit to the poorest working families and diverts resources to much wealthier families.