Expanding Child Tax Credit for Good Has Bipartisan Potential

The incoming administration has signaled its willingness to explore an expanded child tax credit—potentially to $5,000 per child, which would be a boon to families nationwide.

But any reformed tax credit should embrace monthly payouts, simplify access through the IRS Direct File system, and encourage state-level matching programs to maximize impact and make the policy politically saleable.

These changes would support struggling families while appealing to conservative priorities by involving states in policy execution. With the new administration already considering tax reforms, this is a timely opportunity to propose politically viable and transformative improvements to the credit.

The child tax credit’s expansion during the Covid-19 pandemic illustrated its remarkable ability to reduce child poverty and provide much-needed financial stability to millions of households. According to Columbia University’s Center on Poverty and Social Policy, when it expired in 2022, 3.7 million children were cast back into poverty—demonstrating through its absence how impactful it had been.

The policy’s success wasn’t just about the expanded dollar value. It also thrived because of how the benefits were delivered.

One of the most impactful features of the 2021 expanded credit was its delivery via monthly payments, rather than a single refund at the end of the year. This transformed the credit from a one-time financial shot in the arm to a reliable income stream, allowing families to cover recurring expenses such as rent and groceries. Regular payments helped to stabilize household budgets and avoid the cost of financing monthly expenses while waiting for a windfall.

Monthly payments are more effective partially because of their immediacy and flexibility. With them, families facing unexpected bills have better means to respond without resorting to high-interest loans or other financial instruments.

Studies found households most often used the payments for food, clothes, and utilities. This meant the monthly payment structure also helped curtail food insecurity—a particularly pernicious effect of childhood poverty.

While an expanded child tax credit would reach millions of families, many of the most vulnerable households could miss out due to a complex enrollment process. Families with no tax filing requirement may not even learn that the program is available—especially if it returns as a one-time credit applied at tax filing. Information campaigns can raise awareness, but any administrative hurdles in filing for the credit would be a barrier for some qualifying families.

Using the IRS Direct File system can help solve this issue. By integrating enrollment into a user-friendly platform with existing technologies, families could access benefits without submitting a full tax return. In the process, non-filing families would learn about the importance of checking Direct File to ensure they don’t miss out on any future relief programs.

Households receiving federal benefits through the Supplemental Nutrition Assistance Program or Medicaid could have their eligibility automatically verified and payments initiated. This approach would benefit individual households while helping to modernize and streamline federal programs.

Encouraging state-level participation through matching incentives would be another powerful way to maximize the child tax credit’s impact. By offering grants to states that establish complementary programs, the US government could multiply the benefits available to families while encouraging states to tailor policies to their unique needs.

The federal program therefore would exist chiefly as a child tax credit floor rather than a ceiling—guaranteeing a minimum level of aid and avenues for states to provide more.

State-level programs could provide additional funds for families with children younger than a certain age or address regional cost-of-living differences and disparities. States with higher childcare expenses could use their matching programs to offset those costs, while states especially wracked by inflation could use their programs to target food insecurity.

Politically, this may make the program more palatable for conservatives and the Trump administration—it cedes some control to states while broadening the credit’s reach and ensuring every dollar invested has a force multiplier of local collaboration. Such an incentive could turn an expanded child tax credit policy from an aspirational dare-to-dream policy into a pragmatic proposal with real potential for congressional approval.

The expanded child tax credit’s full potential as a permanent benefit remains untapped. When it expired, it demonstrated why it never should have been temporary. With monthly payments, a simple application process, and state-level matching incentives, policymakers can craft a more effective program—one that could endure.

Building on the success of the earlier expansion with a few enhancements offers a clear path forward for the broader child poverty agenda. As the Trump administration gears up for potential tax reforms, the expanded child tax credit offers a unique opportunity to deliver meaningful relief to families through bipartisan agreement.

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and adjunct professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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