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Tax Changes in the Federal Budget Bill Are a Disaster for Many American Families

Tax changes in the budget reconciliation bill currently under consideration by the U.S. Senate will exclude many U.S. children and families from vital tax credits—credits shown to improve child health and well-being.

Opinion

Tax Changes in the Federal Budget Bill Are a Disaster for Many American Families

A family together in their kitchen.

Getty Images, The Good Brigade

Anyone raising children in the U.S. knows that it’s expensive. Many jobs – especially the service jobs that do essential work caring for our children and elders, bringing us food, cleaning our office buildings, and so much more – don’t pay enough to cover basic needs. From rising grocery costs to unaffordable housing, it’s becoming harder and harder for American families to make ends meet.

Unfortunately, if our leaders don’t step up, it will soon get even more difficult for families. That’s because the budget reconciliation bill passed by the U.S. Senate on Tuesday, now under consideration by the House of Representatives, includes critical tax changes that will leave many children, their families, and, ultimately, our communities in the lurch.


Helping families with childrearing costs is an investment in the next generation, making it an economic as well as a moral imperative. But the United States is an outlier here. Our public spending on families with children, as a percent of GDP, is lower than all but one peer nation. Similar wealthy nations usually provide families with a child allowance, which reduces child poverty and its related harms.

In the U.S., we have the Child Tax Credit, a tax refund of up to $2,000 per year per child for lower- and moderate-income households with children. But this credit leaves behind millions of children, with 17 million children nationwide currently excluded from the full credit because their parents’ income is too low. In Orange County, California, where I live and work, approximately 141,000 children are excluded.

Congress’s proposal would maintain these exclusions and lock even more children out of the full credit. That’s because new requirements would mean 2.6 million U.S. citizen children would lose their eligibility just because their caregiver lacks a social security number.

This is the complete opposite of what we should be doing. Expanding the Child Tax Credit is among the most effective ways we can direct public resources. After the American Rescue Plan expanded the Child Tax Credit in 2021, child poverty fell by 46 percent, to its lowest recorded level. The research is clear that the monthly payments helped families provide food and other day-to-day necessities for children. And supporting families in meeting their needs helps to prevent child abuse and neglect, keeping small setbacks from spiraling into crises.

Not only does expanding the Child Tax Credit pay off in improved child health and well-being – which benefits us all – it also boosts local economic activity. The expanded Child Tax Credit was poised to deliver $11.5 billion in economic benefits for California in the year after its passage.

It doesn’t end there. The federal budget bill would also impact the Earned Income Tax Credit, which goes to lower- and moderate-income working families and has long been one of the most vital, bipartisan anti-poverty programs in this country. Already, approximately 1 in 5 eligible families miss out on this tax credit because of difficulties filing for it. New, tedious paperwork requirements would mean even more eligible families would be left behind just because of red tape.

Child poverty spiked after the Child Tax Credit expansion expired. The budget bill’s tax proposals, in tandem with deep cuts to Medicaid, food assistance, housing assistance, and more, will accelerate that trend by keeping more families from receiving these vital supports.

But it doesn’t have to be this way. The Senate-passed bill is not yet law – it now heads back to the House, where these harmful proposals can still be changed. Our leaders must step up to protect children, or the affordability crisis will only get worse for many families across the country.

Kelley Fong is assistant professor of sociology at the University of California, Irvine, where she studies social policy and family life. She lives in Irvine.

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