111-5 ), have altered the structure of this tax benefit. Specifically, the amount of the credit per child has increased and the credit has been made partially refundable, expanding the availability of the credit to some low-income families. The American Taxpayer Relief Act (ATRA; P.L. 112-240 ) made the EGTRRA changes to the child tax credit permanent. 114-113 ) made the ARRA change to the child tax credit permanent. The economic analysis focuses on the equity (i.e., "fairness) of this tax provision, based on different definitions of equity, and examines the limited impact of the credit on taxpayer behavior. This report does not provide an in-depth examination of the history of the credit. The child tax credit has three key features. Amount: The credit equals a maximum of $1,000 per child. Prior to this expansion, the credit was largely available only to middle- and upper-middle-income taxpayers. The child tax credit is refundable. Tax complexity associated with child-related tax provisions is particularly burdensome for lower-income families. The impact of modifications will depend on a taxpayer's income. Modifications that benefit middle- and upper-middle-income taxpayers include increasing the amount of the credit per child and increasing the phase-out thresholds. Modifications that benefit lower-income taxpayers include reducing the refundability threshold or increasing the current refundability rate. These changes will likely have significant budgetary cost that policymakers may consider alongside policy goals they may achieve by increasing this tax benefit. Reducing the Refundability Earnings Threshold and Increasing the Refundability Rate

Among lower-income taxpayers, whose tax liability is less than the value of their child tax credit, the most relevant parameters of the child tax credits are those that affect refundability. The Impact of the EGTRRA and ARRA Changes to the Child Tax Credit

The most recent changes to the child tax credit were made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L.
The child tax credit is currently structured as a $1,000-per-child credit that is partially refundable for lower-income families with more than $3,000 in earnings. Prior to 2001, the child tax credit was a $500-per-child nonrefundable tax credit which generally benefited middle- and upper-middle-income taxpayers.
Since 2001, legislative changes, particularly those made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), have altered the structure of this tax benefit. Specifically, the amount of the credit per child has increased and the credit has been made partially refundable, expanding the availability of the credit to some low-income families. The American Taxpayer Relief Act (ATRA; P.L. 112-240) made the EGTRRA changes to the child tax credit permanent. The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113) made the ARRA change to the child tax credit permanent.
In light of these recent changes to the structure of the child tax credit, this report provides an economic analysis of the current credit, focusing on the credit's impact on fairness (also referred to as "equity"). The report then explores how the credit has affected taxpayers' behavior about working and having children. Finally, this report examines the complexity of administering this tax provision in the context of other child-related tax benefits.
This report concludes with an overview of possible modifications to the child tax credit. The impact of these modifications will depend on a taxpayer's income. Modifications that benefit middle- and upper-middle-income taxpayers include increasing the amount of the credit per child and increasing the phase-out thresholds. Modifications that benefit lower-income taxpayers include reducing the refundability threshold or increasing the current refundability rate. These changes will likely have significant budgetary cost that policymakers may consider alongside their policy goals.
This report does not provide an in-depth examination of the history of the credit. For more information on the legislative history of the credit, see CRS Report R41873, The Child Tax Credit: Current Law and Legislative History, by [author name scrubbed].