Episode 12: "Assessing 25 Years of the CTC" Senate Hearing

We are pleased to bring you this special edition of The Invisible Americans podcast. On July 13, 2023, the Senate Subcommittee on Taxation and IRS Oversight met to discuss the Child Tax Credit and its impact over the last quarter century.

Around the 44-minute mark, listen to an exchange between known critic Sen. Ron Johnson and Sen. Bennet that lasts around 15 minutes and explores various complexities around alleviating poverty.

Sen. Michael Bennet (D-CO) chaired this hearing. Stay tuned for an upcoming episode with Sen. Bennet!

Member Statements

Michael F. Bennet (D - CO)

John Thune (R - SD) Download Statement


Katherine Michelmore, Ph.D.
Associate Professor, Gerald R. Ford School Of Public Policy
University of Michigan
Ann Arbor , MI Download Testimony

Indivar Dutta-Gupta
President & Executive Director
Center for Law and Social Policy
Washington , DC Download Testimony

Kevin Corinth, Ph.D.
Senior Fellow, Deputy Director, Center On Opportunity And Social Mobility
American Enterprise Institute
Washington , DC Download Testimony

Angela Rachidi, Ph.D.
Senior Fellow And Rowe Scholar
American Enterprise Institute
Washington , DC Download Testimony

MICHAEL F. BENNET (00:00:02:15)


Thank you for being here. Good morning. I'm pleased to call the Subcommittee on Taxation and IRS Oversight to order. I want to thank Ranking Member Thune for his partnership on this hearing, also for the partnership for his staff, along with the colleagues who are going to join us throughout the day. We've got a voting schedule this morning, so people will probably be in and out.


But I am thrilled to have the panel that we have today to discuss the 25 year old child tax credit and its benefit to tens of millions of American children over its history. This tax credit, which is the single largest federal expenditure in kids, has made it easier for families to afford rent, groceries, child care, and the thousands of other expenses that come with raising a child in America at its best.


The child tax credit has lifted nearly 2 million children out of poverty and demonstrated that we don't have to accept in the wealthiest country in the world that the level, the highest levels, one of the highest levels of childhood poverty in the industrialized world as a permanent feature of our economy and our democracy. And today's testimony will learn much more about the history of the child tax credit and its success.


And although there have been occasional differences in approach between the two parties, I think it's important to recognize that the child tax credit has been expanded both in size and to whom it's been made available as a result of bipartisan consensus and agreement. Indeed, I want to record here that among the first lawmakers to officially embrace the CTC were Republican members of the House in 1994 who included a $500 credit in Newt Gingrich's Contract with America.


And it was President George W. Bush who worked with both Democrats and Republicans in Congress to make some of the child tax credit refundable for the first time, expanding some of the benefit to low income families. In 2017, Congress passed the Trump tax cuts without bipartisan support. That bill doubled the maximum size of the credit from $1000 to $2000.


But it also made it more available to wealthier families by increasing the income threshold to $200,000 for individuals and $400,000 for married couples. Around the same time, my colleague Sherrod Brown and I took a different approach and introduced the American Family Act. That bill made the child tax credit fully refundable. Cutting taxes for the poorest families in the middle class.


And we did that because no child chooses to be born poor. But as our witnesses will tell you today, growing up in poverty can shape a child's future and the country's future in ways that are profoundly unfair. I saw the effect of that poverty every single day when I worked for the children in the Denver Public Schools as their superintendent and as a society, we've paid the price.


Child poverty costs our country up to $1,000,000,000,000 a year in the form of more hospital visits, lower earnings and higher crime. And that's why economists from across the political spectrum agree that investing in our kids is one of the best choices we can make for our country. According to Columbia University, every dollar we invest in the expanded child tax credit guarantees $9 in benefits to society down the road.


And when COVID exacerbated and revealed further inequities in our economy, we passed the American Family Act as part of the American Rescue Plan. And we'll hear today that unlike many things the federal government attempts, it was an enormous success. As the research predicted, 62 million kids benefited. 90% of kids in every single state in Colorado, moms spent it on things like groceries and rent and and diapers and textbooks.


It reduced stress for kids and for their parents, and it helped cut childhood poverty in half and hunger by a quarter. We found out that an extra $10 a day didn't actually reduce workforce participation, as some people have said. There is a growing chorus of research now, some of which are witnesses will share today that shows the expanded child tax credit is pro-family, pro-worker and pro-democracy.


For six shining months in 2021, we finally treated children in poverty in this country like they were our children, not someone else's children. But we failed to extend the child tax credit, the expanded child tax credit. And now, because of that failure, child poverty is rising again in America. Child hunger is rising again in America. And American children continue to go to bed hungry in the richest country in the world.


Today, I hope will have a discussion about why we should move forward in a bipartisan way to make the full expanded credit available to every kid in America. We should consider how extruded Maria would be for the wealthiest country in human history with the fourth highest rate of child poverty among rich nations. As we meet here this morning, was able in the end to end childhood poverty, to have an economy that when it grows, it grows for everybody, not just the people at the very top.


My hope is that in the months ahead will build on 25 years of child tax credit expansions to support America's children. And with that, I'll turn it over to my colleague and the ranking member, Senator John Thune, for his opening statement.



JOHN THUNE (00:05:47:13)


Thank you, Chairman. Chairman Bennet. And to you and your staff for we're working and all our panelists for being here today to examine and further explore this important issue. Today, we are here to discuss the child tax credit and evaluate its 25 year history, review its effectiveness in helping to ease the financial burden on American families, and to discuss modifications of the credit that Congress should consider.


In 1997, the child tax credit was created as a $400 nonrefundable per child tax credit, intended to help make life a little easier for working families and children. I was a member of the House of Representatives at the time. As Chairman Bennet pointed out at that time, Speaker Gingrich is part of the agenda among House Republicans. Bill Archer was the chairman of the Ways and Means Committee, and the child tax credit was born over the last 25 years, the child tax credit has expanded and evolved.


And like some issues that we debate in this committee, it continues to have a fair amount of bipartisan support today as a result of the tax Cuts and Jobs Act. The credit provides qualifying families with $2,000 per dependent child and $500 per non-dependent child up to the age of 16. And due to this expansion of the child tax credit, families across the nation are able to recap, or I should say, to reap the benefits of a more lucrative credit.


However, this expanded child tax credit is set to expire and revert back to pre tax cuts and Jobs Act levels begin in 2026 if allowed to happen. Families in South Dakota in across the nation would see their child tax credit benefit cut in half and back to the 2017 levels. Therefore, it's my hope that my colleagues on the finance Committee and the Senate see the necessity for this expanded child tax credit to not be allowed to simply expire in just a few short years.


As we all know, there is a push by some to reinstate the temporary changes to the child tax credit that were included in the American Rescue Plan in 2021 and have since expired. This is an approach that I have serious concerns with, as do many others, including some of our witnesses. The American rescue plan went beyond simply increasing the per child tax credit amount.


It extended the credit to children who are almost adults. It adopted a completely new approach by mandating taxpayers who did not opt out to receive half their credit in advance, significantly straining the IRS resources and leading to refund delays, surprise tax bills and lengthy call wait times for two consecutive tax filing seasons among a host of other administrative challenges.


Though we can debate the merits of any of these changes, in my view, the most concerning change was that Democrats eliminated the credits tie to working and earning a basic amount of income. This single change essentially turned a credit. The target's assistance toward working families into universal basic income for anyone with a child. This contentious and expensive change is also completely contrary to the original intent of the child tax credit.


Eliminating the tie between the child tax credit and working takes away a key incentive, a bonus of sorts for certain parents to enter and to stay in the workforce. Such an incentive has been part of the child tax credit since its inception in one that is lauded in other income support programs such as the Earned Income Tax Credit.


Today, while many try to reframe reframe the discussion, the child child tax credit originated during the broader back to work welfare reform push of the 1990s and cannot be understood without comprehending the lessons of this highly successful series of reforms. One primary objective of welfare reform was to get families out of the cycle of perpetual poverty by providing them with a hand up rather than a handout.


That is why the Personal Responsibility and Work Opportunities Reconciliation Act incorporated work requirements into various federal programs. These changes were decried by some at the time is being unfair or mean spirited and likely to lead to harm for those who need assistance. In fact, the data is irrefutable to the contrary. Welfare reform worked and had amazing and positive outcomes for the most economically vulnerable by tying government assistance to a work to workforce participation, beneficiaries of various federal programs are incentivized to get a job which provides the best pathway out of poverty and a host of other positive outcomes.


Clearly, there are certain instances in which a parent does not have the ability to work, but there are current programs like the Earned Income Tax Credit and work that do not require one to build or one to hold a job, I should say, in order to read the full benefits of the program. However, turning the child tax credit into universal basic income is both duplicative and counterproductive, and I believe this is the wrong approach.


Instead, I believe it is imperative for Congress to ensure that we continue to build on the successes of the child tax credit that we witnessed over its 25 year history. Rather than fixing what is not broken, I look forward to hearing from our witnesses on this very important issue, and I look forward to our discussion. Thank you, Mr. Chairman.



MICHAEL F. BENNET (00:11:04:17)


Thank you, Senator Thune, for that excellent opening statement. And with that, I'm going to introduce the witnesses. Let me introduce first Mr. Dutta. GUPTA who's the who's the president and executive director of the Center for Law and Social Policy, a nonpartisan anti-poverty nonprofit focused on advancing policy solutions to improve the lives of people with low incomes. Prior to joining CLASP, he was the co-executive director of the Georgetown Center on Poverty and Inequality, where he led work to develop policy recommendations focused on poverty and inequality, advancing racial and gender equity and advancing economic inclusion.


Earlier in his career, Mr. Gupta served as a professional staff member on the House Ways and Means Committee for the Subcommittee on Income Security and Family Support. He received his B.A. with honors from the University Cargo and Law Letters and Society and in Political Science, and was selected as a Harris Truman scholar. Professor Catherine Mitchell. Moore is an associate professor of public policy at the University of Michigan's Gerald Ford School of Public Policy.


Professor Mitchell Moore is a leading scholar and educator on the social safety net education policy, labor, economics and economic demography. She is a recognized expert on the efficacy of the Earned Income Tax Credit and its impact on children. She completed her Ph.D. in policy analysis and management at Cornell University. She holds a B.A. in economics and psychology from Wesleyan University.


Dr. Kevin Corinth is a senior fellow and the deputy director of the Center on Opportunity and Social Mobility at the American Enterprise Institute. Before joining the UI, Dr. Korn served as the staff director of the Joint Economic Committee in Congress and chief Economist in the White House Council of Economic Advisors. Dr. Lawrence has a Ph.D. and an M.A. in Economics from the University of Chicago.


He holds a B.A. in Economics and political science from Boston College. And last but not least, Dr. Angela Rashidi is a senior fellow and a Rhodes Scholar. An opportunity and Mobility studies also at the American Enterprise Institute, where she studies poverty and the effects of federal safety net programs on low income people in America. Before joining AEI, Dr. Rashidi researched benefit programs for low income populations in New York City from 2007 to 2015.


She served as a deputy commissioner in New York City's Department of Social Services, where she oversaw the agency's policy research and program evaluation efforts. She received her Ph.D. from the New School and MPA from Northern Illinois University and a B.S. in public administration from the University of Wisconsin, Whitewater. I am extremely grateful to have all of you here today for this for this hearing.


Mr. Delegate, Professor Mitchell Moore, Dr. Corinth, and Dr. Rashidi. I look forward to your testimony. And with that, I think we're going to go to Mr. Derek. We, as a reminder, we ask each of you to keep your testimony to 5 minutes each, and any written testimony will be submitted for the record. You might hear me tap the gavel should your time expire, Mr. Delegate. You're recognized for 5 minutes.




Thank you. Chairman Bennett, ranking Member Thune, and members of the subcommittee. My name is Indi Gupta, and I'm president and executive director of the Center for Law and Social Policy, or CLASP. I'm honored to come before you to discuss the bipartisan quarter century history and extraordinary track record of the child tax credit. I've been working on policies to reduce poverty for nearly two decades as professional staff on the Ways and Means Committee from 2007 to 2010.


I worked on a bipartisan basis to reduce the tax credits, discriminatory treatment against people when their incomes are low. We succeeded in shrinking the earnings that are not counted toward the credit from around $11,000 a year to $3,000 a year. Later, I worked at think tanks and advanced a more effective CTC. The child tax credit was established through the Taxpayer Relief Act of 1997.


The credit was the culmination of recommendations made by the National Commission on Children that were embraced by both Republicans and Democrats. The first CTC was modest and must nonrefundable. Over the next two decades, the CTC was strengthened. The benefit grew to $1,000 per child and was made partially refundable in the first large tax package signed by President George W Bush.


However, the CTC ignored the first $10,000 in earnings, so a full time minimum wage worker with two children received just $45. She would not get the full credit until she worked the equivalent of more than two full time minimum wage jobs. During the 2007 to 2009 financial crisis. Bipartisan legislation lowered the earnings threshold to $3,000 temporarily. So this minimum wage worker could now receive $725.


On a bipartisan basis, this provision was extended multiple times and then made permanent in 2015 alongside various corporate tax cuts, including the R&D tax credit. President Trump's 2017 tax law increase the credit to $2,000 per child and lowered the earnings threshold to 20 $500 in 2021. The American Rescue Plan acts child tax credit. One year expansion led to all time lows in child poverty, as well as in racial disparities in child poverty, with little or no undesirable effects.


Key to this impact was full refund ability, which helped include those families that would most benefit from an income boost and ensure that they got an equal benefit. Unfortunately, policymakers didn't extend this historic investment and millions of families have struggled as a result. The United States is the only Western industrialized nation that doesn't have a child allowance policy or some other universal public benefit for families raising children.


Those are not my words, but the words of the 1991 National Commission on Children, which included 12 Reagan and Bush appointees. These appointees unanimously recommended something like the American Rescue Plan Child Tax Credit at the end of 2025. Major provisions of the Trump tax law, including those that expanded the child tax credit, expire. This creates an opportunity to establish an improved CTC, drawing on decades of evidence, a vast array of rigorous studies has demonstrated that the child tax credit in similar policies helped families with low incomes, provide a foundation for their children to thrive.


Here are a few examples. Children whose mothers receive payments from the Mothers Pension program a century ago lived one year longer, obtained one third more years of schooling, were less likely to be underweight and had higher income in adulthood compared to children whose mother's applications were rejected. A study of pandemic era stimulus and child tax credit payments found that each additional $100 in unconditional transfers that a pregnant mother received reduced the prevalence of low birth weight, which can have lifelong effects by 2 to 3%.


A study looking at birth and tax years found that an extra $1,000 tax transfer to low income families with children result in 2.6% fewer referrals to Child Protective Services through age two and 7.9% fewer days spent in foster care. The child tax credit provides such unequivocally positive outcomes because each of us needs a basic foundation to develop fully and thrive.


A modest income floor allows parents to invest more in their children and reduce their own stress. In turn, the likely improving parent child interactions an expansive child tax credit offers enormous gains. Researchers calculate that a permanent version of the ARPA child tax credit would return more than $9 to society for each dollar spent with little to no harmful consequences.


If policymakers can come together and establish a permanent and equitable child tax credit, our entire nation will become more just and prosperous.



MICHAEL F. BENNET (00:19:36:15)


Thank you, Mr. Gupta. Appreciate very much your testimony. Dr. Michelmore Thank you.




Chairman Bennett, Ranking Member Thune, and distinguished members of the subcommittee, thank you for the opportunity to testify today. I'm an associate professor at the Ford School of Public Policy at the University of Michigan. But I'm here on my own behalf, and the views expressed here are my own and should not be attributed to my institution. My testimony today will provide an overview of the children left out of the current law child tax credit, as well as the impacts of the Historical American Rescue Plan Act reform to the child tax credit and the likely enormous long term societal benefits of making these reforms permanent.


As Chairman Bennett said, the child tax credit is the single largest federal expenditure program for children in the U.S.. Despite its scope, the current structure of the CTC prevents approximately 19 million of the poorest children in the U.S. from receiving the full credit. In fact, nearly all children living in the bottom 10% of the income distribution are not eligible for any CTC benefit.


In contrast, nearly all children residing in the households in the top half of the income distribution are eligible for the full benefit. Excluding the poorest children in the U.S. from the child tax credit goes against the evidence that we have about the importance of income for children's future life chances. An extra dollar matters the most for kids living in the poorest households.


Eligibility for the CTC is racially and geographically concentrated. As of 2023, nearly half of black and more than one third of Hispanic children resided in households that were not eligible for the full credit, compared to just 17% of white children. Likewise, children living in the rural areas and coming from larger families are also less likely to receive the full benefit.


To give a few concrete examples, as Dr. Mr. Gupta said, a single earner family with two children working full time year round at the federal minimum wage would not be eligible for the full CTC. Such a family would need to earn more than $30,000 per year to qualify for the full benefit, which is well above the official poverty threshold and more than twice the earnings of someone working full time year round at the federal minimum wage.


In contrast, under current law, a married couple with annual earnings of $400,000 would qualify for the full $2,000 per child benefit. In fact, nearly all children residing in households in the top half of the income distribution are eligible for the full benefit, while more than a quarter of the poorest children in the U.S. are not. The 2021 ARPA reform to the CTC marked a critical moment in CTC legislative history, transforming the benefit into something akin to a universal child allowance.


The growing body of evidence on the impact of the reforms suggests that they had real positive impacts on the well-being of families, particularly low income working families. Survey evidence suggests that families spent their benefit primarily on basic needs, such as food and housing, as well as child related items and paying down debt. The Census Bureau estimates that child poverty declined by nearly half in 2021, keeping nearly 3 million children out of poverty following the expiration of the monthly payments in 2022.


Estimates suggested that 3.7 million more children were living below the poverty line. Other measures of material hardship also improved during the months that the CTC was in place. Material hardships, including food insecurity and housing hardships, declined substantially. Evidence also suggests that the CTC reduced child maltreatment in the days following the payments and increased infant birthweight. Both of these outcomes have been shown to lead to longer term improvements in child outcomes.


One of the central debates about making the RPA reforms to the CTC permanent at the end of 2021 was surrounding how therefore reforms might reduce parents incentives to work. However, the vast majority of research on the reforms found no evidence that the credit caused parents to work less. With survey evidence suggesting that the credit actually helped some parents work more by allowing them to afford the necessary costs associated with work such as childcare and transportation.


While it's too soon to tell how these reforms will benefit children in the long term, history tells us that the societal benefits are likely to be enormous. A recent study by researchers at Columbia University estimated that the $97 billion spent on the expanded CTC could generate $929 billion in long term societal benefits, a return on investment of more than 9 to 1.


These calculations were based on a long line of research that points to the importance of income on children for children's success in both the short and long term. For instance, children who receive more income in early childhood through tax credits such as the Earned Income Tax Credit and other social programs like food stamps go on to have higher test scores in school, have better health outcomes, complete college at higher rates, and have higher earnings in adulthood.


They're also less likely to live in poverty and less likely to receive public assistance in adulthood. In short, the evidence is clear that a permanent expansion of the CTC is likely to pay off several times over for both the beneficiaries themselves, as well as society at large. Thank you.


MICHAEL F. BENNET (00:24:33:09)


Thank you, Dr. Corinth. You have 5 minutes.



KEVIN CORINTH (00:24:39:04)


Chairman Bennett, Ranking Member Thune, and Subcommittee members, thank you for the opportunity to testify this morning. The child tax credit, the version that we have today, should be celebrated as a bipartisan achievement because it serves the dual purpose of providing tax relief for families and encouraging work. Since it was introduced 25 years ago. The child tax credit has become more generous and has been expanded to more working families, including to those who don't earn enough to pay federal income tax.


Today, for a full time worker with two children, the child tax credit effectively turns a $15 per hour job into a $17 per hour job, increasing take home pay by $4,000 over the course of a year. Rewarding, rewarding work through the tax code has been shown to increase employment, especially for low income families. It also improves the well-being of children who not only perform better academically in the short run, but also achieve higher earnings and greater self-sufficiency when reaching adulthood.


In short, incentivizing work through the tax code as the child tax credit has done for almost its entire 25 years of existence, is a proven strategy for increasing employment, reducing poverty and investing in the long run success of children. However, for six months during 2021, the child tax credit was completely changed. Instead of offsetting taxes and rewarding work, it was transformed into a universal child allowance, costing an additional $100 billion annually.


If made permanent, it would lead an estimated 1.5 million parents to exit the workforce and could put at risk the long run benefits for children that result from the existing child tax credit. Unfortunately, the risks of adopting a child allowance have been overlooked. The intellectual foundation for this idea was provided in part by a National Academy of Sciences report in 2019.


That report concluded that replacing the child tax credit with a child allowance would have a negligible effect on employment and thus dramatically reduce child poverty. However, the report made a fundamental error. It failed to recognize that the work incentives in the existing child tax credit would be eliminated. When my coauthors and I corrected the error and use their own assumptions about how parents respond to work incentives in other contexts, we found that well over a million parents would exit work due to the policy change.


Unfortunately, the National Academy of Sciences has been unwilling to correct the public record about their error, misleading policymakers about the true consequences of their decisions. Policymakers are now being misled again by faulty interpretations of studies that examined the 2021 experience with the child allowance. These studies test whether parents who received the child allowance during the second half of 2021 were more likely to quit their jobs.


But contrary to assertions, these studies do not provide a useful guide to the effects of making the child allowance permanent. There are three main reasons. First, it's hard to believe that most parents understood how work incentives changed in 2021 when the child allowance checks were being paid out. As late as September of that year, 462 economists wrote a letter to Congress in which they failed to recognize that the child tax credits work.


Incentives were eliminated. It's unrealistic to think that most parents would have understood more quickly. In fact, previous research suggests that it would take several years for employment responses to fully materialize. Second, parents would have been less likely to quit their jobs in response to a temporary six month policy change in real world labor markets. Workers cannot suddenly quit their jobs than automatically get them back six months later when the work incentives are restored.


Third, even if parents understood the weakened work incentive more quickly than 462 economists, and even if they had jobs, they could seamlessly move into and out of the 2021 experience would still provide little help in understanding the consequences of a permanent extension of a child allowance. That's because a lot was going on in 2021 that made it unique.


How parents respond to work incentives in the midst of a pandemic and other unprecedented government aid is likely to differ from how they would respond in less extreme times. While these issues may sound obvious, some have nonetheless extrapolated from the experience with the 2021 child allowance to what would happen if it was made permanent. They have claimed that we now have evidence that it would have little effect on employment and thus dramatically reduce child poverty.


That is simply not true. The existing child tax credit follows a proven strategy for increasing work, reducing poverty and investing in children's long run success. Replacing it with the child allowance would provide more resources to low income families in the short run, but at the same time threaten self-sufficiency and children's well-being in the long run. As you discuss ways to better support families, I hope that you consider both the benefits and the costs of possible policy changes.


Thank you and I look forward to your questions.


MICHAEL F. BENNET (00:29:22:20)


Testimony as well. Dr. Rachidi, you get the last word for the moment.


ANGELA RACHIDI (00:29:28:19)


Chairman Bennett, Ranking Member Thune and Subcommittee members. Thank you for the opportunity to testify. My name is Angela Rashidi and I am a senior fellow at the American Enterprise Institute, or AEI. My research at AEI focuses on the intersection of safety net policy and employment as a path out of poverty. I want to make three key point three key points in assessing the history of the child tax credit.


First, Congress created the CTC as a credit against federal income taxes owed by working families with children, complementing the earned income Tax Credit, or EITC, which primarily benefits low income families, working families who do not owe federal income taxes. Second, over the years, Congress has expanded the refund ability of the CTC, meaning that it now substantially overlaps with the ITC and other safety net benefits, a fact that is frequently overlooked.


Finally, proposals to turn the CTC into a child allowance are now are not targeted well to low income families. And these proposals proposals jeopardize progress made in the U.S. on child poverty. The CTC started in 1997 as a modest $500 per child, nonrefundable tax credit for working families as a way to offset some of their federal income and payroll tax liability through several expansions.


It is now partially refundable. Key design features include that it phases in at 15% of earnings above 20 $500 per year, which incentivizes employment. The CTC works in conjunction with the fully refundable ITC, which operates in a similar way but targets low income working families without federal income tax liability. Approximately 86% of the ITC is refundable, while 39% of the CTC is refundable.


This brings me to another often overlooked point. By increasing the refund ability of the CTC. Over the years, policymakers have added this transfer payment on top of the existing safety net. For example, under current law, the typical working single mother with two children earning $12 per hour for full time work would receive the refundable ITC, refundable CTC and SNAP benefits totaling more than $12,000 in government benefits per year alone.


An increasing her income by 50%. Her children would likely also receive free school lunches, health insurance through Medicaid, and the family could receive housing and child care assistance averaging another several thousand dollars per year. Nonworking families could receive SNAP SSI, free school lunch, TANF and other benefits. The safety net I just described is most generous for parents when they work.


The refundable EITC and CTC phased in with earnings and do require some employment to maintain eligibility. Studies have documented the many positive effects associated with this design. We cannot rely on the 2021 temporary CTC expansion to understand how a permanent child allowance would affect outcomes due to it being a temporary policy. And because the research suffered from the inability to study the policy in a controlled environment.


For these reasons, we should look to other research to suggest how an expanded CTC might affect families over the long term. One recent study tested an unconditional cash payment for a group of randomly assigned families with a new baby called Baby's First Years. The study produced mixed results. Although there was no statistical difference in whether a mother worked or not.


At the time of surveys, the payments did reduce full time employment by 11% across three years and hours worked by 12%. This demonstrates the importance for policymakers of taking seriously concerns over how government payments affect employment. My final point is that turning the CTC into a universal child allowance does not target poverty well, which is likely why studies in other countries have found that universal child benefits fail to improve long term outcomes.


For example, economist James Heckman studied universal child benefits in Denmark and concluded that although redistribution did decrease income inequality, it failed to close achievement and skill gaps. Proposals for a child allowance in the U.S. would similarly target low income families poorly. The Penn Wharton budget model found that a 2021 type CTC expansion would distribute only 50% of new benefits to those in the bottom two income quintiles.


To conclude, proposals to move the CTC away from its original goals of tax relief threaten the country's progress on poverty by discouraging employment and mis targeting important federal benefits. Thank you and I look forward to answering your questions.


MICHAEL F. BENNET (00:34:22:08)


Thank you, Dr. Sherry, and thank you to all of you for your excellent testimony. I mean, I think Senator Thune has to run across the street and try to filibuster here with the folks that are here until he comes back. But thank you for the witnesses. I think you guys have done a really good job of delineating the different views of this.


So let's get into this conversation and Dr. Mitchell Moore, I think I'll start with you, Professor Mitch Moore, ethical start, start with you. I think we could spend the whole 2 hours here going over the research that proves expanded. CTC doesn't discourage work and and the effects on poverty and hunger and parental stress or even in children's visits to the emergency room.


But there are there are people, as we've heard, and who are citing studies that suggest that it will discourage people from working. I do want to say, Dr. Quadrant, and I'm happy to get you into this, too, that I did not rely on that 2019 study when. Sherrod Brown and I wrote this bill in 2017. That was two years before.


So if there are other people relying on it, it wasn't me. And it certainly didn't inform my opinion about whether this was a good policy or not. But I, I think just based on the conversations I have with moms, mostly in Colorado, that some of these critics are living in imaginary world. You know, in a world where a mom who's making $2,000 a month as a janitor, you know, who already can't afford the 1300 dollars a month for a two bedroom apartment.


$900 $900 a month for childcare. You know, in this emerging world, she quit her job paying $2,000 a month because she started receiving $250 a month from the child tax credit. In reality parents can't afford to work because it's too expensive to pay for child care in America. That's not, I don't think, just my opinion. I hear it every single day in Colorado.


So I wonder, Dr. Michelmoore, if you could help clear this up. Is there any evidence about the effect of the expanded child tax credit on work? And could you explain how it actually in some cases helps families work more?




Thank you for the question. The vast majority of the evidence we have to date suggests that we've found no evidence that the monthly payments reduce parents employment. And so while we can't say for sure whether these effects would persist, it's not clear that parents knew that the credits were going to expire. I think many of us did not know the credits would expire until late in the year, and lots of survey evidence does show, as you mentioned, that it actually helps parents work more by allowing them to afford childcare and transportation.


A survey by AEI actually found that the vast majority of parents said that the credit wouldn't impact their employment at all and equal share said it would help it help them work more as those that said it would help them work less.


MICHAEL F. BENNET (00:37:16:06)


Dr. King, do you have anything you'd like to add?


KEVIN CORINTH (00:37:18:22)


I would just add that there's a large literature in the academic literature finding that tax credits that incentivize work do in fact increase work. And I don't think we can rely on the temporary 2021 experience.


MICHAEL F. BENNET (00:37:31:17)


And I appreciate your testimony about that, too, because it was different than other testimony that we've heard from this committee were where people actually imagined sitting in your seat that there were families out in America watching the committee debate over the expanded child tax credit and retreating from the labor market as a result of that debate. I think your testimony is different from that, which is that the tax credit was too short a period and maybe in 2021 and maybe there is too much else in the in the environment to be able to tell.


I think there's pretty convincing evidence on the other side. But I do want to say that that testimony is different from what we've had before. And I'll come back to you if you want to respond to any of that. I do have one other question I'd like to ask at the outset, and since for once I've got the chairman's gavel, I'm going to do that, even though it may go over time slightly.


Senator, you you know, the part of the expanded child tax credit is shared. And I was sure, Brian, I worked on this raise the most debate is what we call full refund ability, which simply means that families get the credit even if their income taxes are less than the credit. And, Mr. Gupta, this question is going to go for you.


We know, first of all, if you look up here, that more than 70% of the people that received the fully refundable credit were working. I think that's a really important point. Seven out of ten were working. If you look at people that were working the year before that, that number is actually more than 80% of the people that were getting the refundable tax credit were were working.


And if you look at the rest of the people that are there, there's 95% that are either working. So the vast majority working. If you want to take just the year of the credit, more than 70%, if you want to take the year before, there were people working and who may have fallen out of the workforce, which is not unusual.


I mean, people do that all the time. That's more than 80%. And then you add up people with a child under the age of two, as Senator Thune said when he was here, maybe there's the opportunity for us to think about people with very young children and whether we'd be happier incentivizing them to work or happier incentivizing them to try to to to raise children.


There are people living with children, living with senior citizens and their children living with disabled people. If you operate all of that, when people have a baby. People are disabled. That's 90% of the families that benefited from the fully refundable credit. I would argue that that 95%, you can't make a case that they're being disincentivized from working because they're either working or because they've got a really good excuse for not working.


And nevertheless, we took this credit away from people that were working. And in doing that, and I'm going to put this in the record later when I had the chance to do it over for 700,000 janitors and housekeepers who do backbreaking work now have lost the benefit of the four refund ability, the credit, the marginal improvement to their income that they were getting as a result of the credit.


Over 700,000 cooks, waitresses, farmers and ranchers who feed this country, almost 600,000 teachers and childcare workers who educate and care for their kids. They got the benefit of full refund ability today. They don't have the benefit and it's not because they're not working. Over 500,000 health care aides and nurses who take care of America's sick and elderly, over 400,000 construction workers who are building this country.


And I'm this is a list from the Center on Budget and Policy Priorities that I'm going to enter into the record. And as I said, we've also taken away from grandparents who worked for 50 years and now probably for circumstances beyond their own control or are helping to raise their grandchildren. The mom of one year olds who are paying more for childcare than they will ever make.


You know, if they if they if they're if they're working. But notwithstanding all of that, and I think there probably people on the other side of the aisle who would say that doesn't sound that sounds injust and counterproductive. Notwithstanding all of that, somebody who makes $400,000 in America gets the full $2,000 credit for every kid they have. Talk about something that's misallocated or mis targeted or misspent.


So, Dr. Dutta-Gupta, could you talk more about who's lost out from the expiration of the enhanced child tax credit? Could you explain you know why it makes sense that we live in a world where someone making $400,000 gets the full credit for every child that they have and that people who are to survive, the vast majority of whom are the vast majority of whom are working, don't get the full credit.




Well, I'm not going to make sense of that world, but I will say that you're exactly right. By making that tax credit fully refundable for one year, we kept nearly 3 million families out of poverty. This particularly helped a lot of families of color, black, Latino. We're talking about nearly half of black children and two in five Latino children who did not get the full child tax credit prior to the temporary ARPA expansions because their family incomes were too low to qualify.


Where you're not showing exactly why sometimes people aren't working, but if you don't have a fully refundable child tax credit, you have a situation where somebody gets hit, say, with a cancer diagnosis and then has to focus on their treatment, step away from work. We already don't have paid family medical leave in this country. We fall short on caregiving in general.


And now we're going to say we're also going to take away your child tax credit or shrink it. Folks lose jobs all the time through no fault of their own. We've recognized that in the past, and it happens throughout the business cycle. Again, people people might be students doing something to advance their prospects in the labor market while they have kids.


And it makes little sense when, as Dr. Moore documented, it's actually those folks who are growing up in families with the lowest incomes where you're going to get the most bang for your buck.


MICHAEL F. BENNET (00:44:12:15)


Thank you. Senator Johnson, thank you for enduring that. And the floor is yours.


RON JOHNSON (00:44:17:08)


I got no choice.


MICHAEL F. BENNET (00:44:18:01)


Take as long as you want.


RON JOHNSON (00:44:20:05)


Appreciate that. Well, first of all, Mr. Chairman, I'm new to the committee. I knew the complexity of this issue. We've been enough hearings. Now, you realize that my thrust always ends up being, you know, the KISS principle. You know, keep it simple, right? This is a classic example of it. We have so many different programs to try and alleviate poverty.


And, you know, one of the tricks I used in the earlier hearing here is, you know, prior to the war on poverty, we had poverty rates dropping precipitously from about 22% down to about the 15% range. And in the 56 years since the War on poverty, we've spent about $23 trillion. It's pretty well flatlined. It's gone up and down a little bit.


But, you know, we haven't conquered we haven't won that war on poverty. I would argue part of the problem is, is simply the complexity. I mean, you know, even this chart I'm going to count, I actually do understand numbers. It's like I don't know how any working family or non-working family or any would even begin to comprehend what the incentives are.


They'll just take what money they get. I would argue we ought to really focus entirely on simplifying what it is we're trying to do. And of course, the real challenge in any type of, you know, what Compassion Society, we want to help people that can't help themselves. We want to help people help themselves. Right. The trick is, how do you design benefit programs that don't make people dependent on government, that don't encourage people to?


You know, we got, what, 20% of the adult working age male population permanently out of the workforce? That's that's not good for America. It's not good for them. It's really not going to solve poverty. So, you know, Mr. Rashidi or Dr. Rashidi, you were talking about the different programs. How many different programs do we have trying to help people?


I mean, do we even know the number?


ANGELA RACHIDI (00:46:16:01)


Well, we have tried to quantify it. There's actually 80 plus programs that are means tested.


RON JOHNSON (00:46:20:10)


Only 80.


ANGELA RACHIDI (00:46:21:06)


Yeah, 80 plus, because it's a little bit hard to identify all of them. But yes, but there are there are roughly five or six major programs that kind of account for the major expenditures that cover food, housing and basic necessities.


RON JOHNSON (00:46:34:20)


Yeah, it's so difficult because it's, you know, just a single mom with one child. I mean, it's hard to come up with stock figures, but I don't know whether you're familiar the work of former Senator Phil Gramm and John Earley, You know, they look at the income gap or the wealth gap, which, you know, on its surface looks pretty dramatic.


But then when you from the the top earners, when you take away taxes and from lower earners, when you add benefits, all of a sudden doesn't look quite that bad. Can you comment a little bit on that?


ANGELA RACHIDI (00:47:07:02)


Yes, it's very true. And actually the CBO puts out great data on after tax and transfer income, and it shows very different trends than if you're looking at pretax. It shows not only that the gap you describe shrinks, but it shows that income, considering all benefits and after tax has increased for those in the lowest income quintiles. So it's important to look at that after tax and transfer because the federal government does provide a lot of transfer payments to low income households.


RON JOHNSON (00:47:36:03)


And again, these benefit are tax free. I think we kind of lose that in the translation as well in a budget hearing. This is many years ago and when we were considering budget items as opposed to climate change, most of the time I remember we had the individuals in charge of the welfare system in Pennsylvania. And it was striking by his testimony, These are just gross numbers.


Don't hold me to them. But, you know, he was describing a person in Pennsylvania who for every additional dollar of work, she would make more money up to about 30 some thousand hours with the income. And then she would have to make something like $65,000 before she put additional dollars in her pocket because of the drop in benefits versus.


So, again, that's called the welfare gap or I mean, or the benefit benefit. Cliff. Yeah, that's a significant problem. And you're talking about earned income tax credit versus this child tax credit. Just to compare, Steve, all this stuff, I would argue we really ought as opposed to just focusing on child tax credit and all these studies that are produced different results based on time frames.


Again, your head just starts swimming. The complexity, I don't think you can really draw any conclusions to it. I would argue what the Finance Committee, what the subcommittee ought to do is take a look. These benefit programs in total, what can we do to simplify them to accomplish the goal that we all agree on is how do we help people help themselves?


How do we help people that can't help themselves? You know, how can we make sure that children don't live in poverty? How can we actually win the war on poverty? Because we're not doing it and we've spent trillions of dollars. And I would argue, you know, one of the problems, one of the biggest problems for people in poverty is that a dollar they held at the start of this administration is now worth less than $0.86.


And it's kind of hard to develop programs that make up for that damage, which is caused by massive deficit spending. And what do we massively deficit spending on programs that make no sense that, again, there is no way a human being can understand exactly how they ought to maneuver Take advantage of this. I mean, it's just it's just impossible.


So, I mean, I'm sorry. I appreciate all your scholarship here, but I mean, I just I honestly studies in my head just swims. Mr. Cohen, do you want to or Dr. Lawrence, you want to comment on this at all?


KEVIN CORINTH (00:50:14:05)


Sure. I would just note in terms of trends in poverty, you're exactly right. If you look at the official poverty measure, we've made no progress. That said, if you include all of the benefits that we pay out, we have made a lot of progress in reducing poverty over time. The only problem is that it's come through government transfers as opposed to self-sufficiency.


And actually in the nineties when we had welfare reform, we not only saw poverty falling, we also saw self-sufficiency growing. So we can do both. You can both increase or increase self-sufficiency, reduce poverty. You just need programs that encourage work like the existing child tax credit and the EIA.


RON JOHNSON (00:50:53:04)


So one of the results of what you just said there, what we ought to do is take a look at these, you know, how we calculate poverty and we ought to build into that. You know, the value, the benefits. So we're actually looking at because again, I, I think that's okay. And most Americans say, fine, great, if we reduce poverty and these people getting benefits, great.


But I would go back to my main point. How do you provide those types of benefits without encouraging dependency? And you know what, actually does long term solve poverty? People work. Plus, providing people the dignity of earning their own success as opposed to just being dependent on government. So anyway, I think these are extremely interesting hearings. I don't understand most of it.


I don't think most people understand most of it, and I'd like to understand it. So that's what I would you know, just yesterday in budget hearing, I said the same thing. We were talking about Social Security. I said, let's let's have some roundtables where we can have full discussions where we're not talking, but by each other and start fixing these problems because we're not fixing them.


MICHAEL F. BENNET (00:52:04:05)


Yeah. And I'll take that as a start. I mean, at least this isn't a boring hearing. Most of the hearings around here are pretty boring. So thank you for that. And I would say just a little bit of reaction to what you're saying. You know, one place I think where it's pretty pretty clear that we've done a good job on poverty, not as good as I would want, but a good job in poverty is Social Security, you know, and what the poverty rate for seniors would look like if we didn't have that program in place.


You know, that's something that actually has worked. And I think that was very much on my mind when we were crafting the child tax code simplicity. That was very much on my mind when we were crafting the child tax credit, because unlike a billion other programs that this committee or this Congress writes in its wisdom to try to make America's life better, you know, what we said is let parents make the decision about how to spend this money.


RON JOHNSON (00:52:55:04)


So the problem with Social Security is it was a concept that made sense. But when we extracted those payments out of people's wages, we didn't put that money into account for them. We spent it. The money's gone. Had we actually put that into like real assets, we little I've done the spreadsheet on this. We literally have $6 trillion of hard assets.


The Social Security Administration you call on as opposed to, you know, those government bonds that have no value to. A government agency got to we got to borrow more money for that. So but that's we we couldn't even get that out yesterday in that budget hearing. So again, what I'm encouraging is.


MICHAEL F. BENNET (00:53:36:00)


That's another.


RON JOHNSON (00:53:36:23)


These are this this kind of dialog in a kind of roundtables post the standard hearing where we get 5 minutes for the questioning where we can really vet these issues, then rely on experts to tell us when we're either full of it or no, that's about right. So we need to have and I think in a public setting to not just in closed doors, but we need a public setting where we have these discussions and both sides get to talk with each other as, opposed past.


MICHAEL F. BENNET (00:54:03:08)


And I think that's great. And, you know, you you know, you mentioned something that I think is is really important as well, which is the persistent chronic, you know, rate of numbers of people, you know, in America who are not today working, you know, the system that we have as a system, you know, the system we have not the system with the child tax payer, the system that we have, you know, our workforce participation rate is actually lower in America today than it is in every single one of these countries that has child allowance, you know, where people have the opportunity to be able to get a little bit of an incremental bump to their


income to to to to stay at work, to pay for a little extra child care, to pay for, you know, for a little bit of extra after school program. I've met kids and parents in Colorado Springs who are telling me about how their built their expanded child tax credit had enabled them to pay for a bicycle so that their kid could stay at an after school program in the spring so they could stay at work.


And if they didn't, if they had to go pick that kid up. And that for me, the thing about this, I think, Senator Johnson, is that, you know, having been the superintendent of Denver Public Schools School District, where most of the kids are kids living in poverty in this country, where most of the kids, most are parents. Whatever these studies say about anything, I will assure you that the people in that school district are working.


They're working two and three jobs in many cases in. They're not lazy. They're not. And I know you're not saying that they're not not working. That's not the problem. They're working odd jobs in the richest country in the world that pay them so little that no matter how hard they work, they cannot lift their kids out of poverty.


And I will say I'll turn it over to you. I will say a huge part of that is because this is not the 1990s in America anymore. A huge part of that is if you look and I've got a slide we can talk about later, if you look at, you know, the economic expansions from the 1930s until today, what you will is especially from the 1980s until today, what you will see is that people's incomes in America have flatlined for 50 unless you are on the top point one, top one, top five, top ten, top 20.


A little bit for the people in the bottom of the top 20 for everybody else, it has absolutely flatlined, especially for the people who are in poverty. And that is a reason why I would argue that we are we face this stubborn problem that we face. It's not just this issue of government programs. In fact, I think much more important than that.


It's that we have had an economy that where the people at the very top have benefited with every period of economic growth and people in the rest of the economy, including not just poor people, but people in the middle class have been flat lining, flat lining, flat lining, so that for them, this is indisputable for them, economic recoveries since the early 1980s have been recessions, not economic recovery.


RON JOHNSON (00:57:13:07)


And this may surprise you to hear this, but I agree with you and you know how rare right now this exchange is in this kind of setting. And it shouldn't be. You know, you were on a school board. Okay. I was on the Partners Education Council in Oshkosh, and I sat with some of the most liberal college professors and most conservative businesspeople.


The politics never came up because we were concerned about what we could do to improve the education of our children. The same thing here. There is so there are so many more things that unify us as a nation. I would argue right now the greatest threat to this country is the division. And I tried to encourage you, Chairman, White House, yesterday, that, you know, okay, social care is really important and that hearing we're just talking by each other.


So let's have a roundtable. His reaction was, well, I'll tell you guys what, your plan on the table, there's no point. Well, and I think, you know, we lay a plan on the table and it'll just be attacked. It's not there are just some basic truths or basic realities that we need to get on the table, agree on the facts.


And these hearings are not they're just they don't work that well. So I would encourage use chairman of this subcommittee. Let's let's use this subcommittee's example. Let's set up a roundtable. Let's bring in some experts to be as advisors, necessarily provide testimony but be as advisors, as we discussed this over a series of meetings. And we I think we will find far more areas of agreement and learn from each other.


I just think it could maybe be a breakthrough in terms of how you can actually solve some of these problems. Again, I've done a lot of problem solving in the private sector. This place drives me nuts. Now it just again, we just don't approach this in a problem solving process where you agree we got a problem, identified the root cause.


You know, compromise is actually the last part of the process. And what it just doesn't work is, you know, one side proposes, you know, offers proposal, the other side like diametrically opposed and you just never get solved as opposed to let's focus on all the areas agreement first and then going through that problem solving process going out. Now we start compromising on exactly how we ought to solve this problem, because again, there's differences of opinion from the witnesses here.


But my guess is all of you want to alleviate child poverty was the best way to do it and start start discussing it. So again, I'm what I'm proposing is a different process. And let's start subcommittee level doesn't seem like we're at the front. I mean, you seem to be a person of goodwill. Let's start doing this.


MICHAEL F. BENNET (01:00:00:12)


Great. Well, thank you, Senator Johnson. I'll take that suggestion and we can think about how to make it work. I do think, you know, again, and I appreciate your agreement at the outset, which I was not expecting, I do think that a lot of what we're struggling with you mentioned the divisions in America. I think a lot of that has to do with the fact that we have had an economy again for 50 years that is not grown the way historically we've expected it to.


You know, where when it grows, it grows for everybody. And it is my view, I don't know whether I'm right or whether I'm wrong, but it is my view that that's when you lose democracies. And in human.


RON JOHNSON (01:00:37:23)


History you need a middle class exact wrong to lose and no.


MICHAEL F. BENNET (01:00:41:18)


Sense of opportunity.


RON JOHNSON (01:00:42:23)


It's not a.


MICHAEL F. BENNET (01:00:43:07)


Good thing they can't move their families ahead. And you mentioned, you know.


RON JOHNSON (01:00:46:12)


I've got a tax plan that would address that to a certain extent, would like to talk about a true Warren Buffett tax.


MICHAEL F. BENNET (01:00:52:03)


You mentioned the which is good because, you know, folks like Warren Buffett should not be paying.


RON JOHNSON (01:00:58:08)

I've got less.


MICHAEL F. BENNET (01:00:59:04)


Taxes than his secretary, but the but on education you know and I do I want to I've got a couple of questions. I do want to ask these guys about priorities and spending.


RON JOHNSON (01:01:10:05)


But I'm assuming that these folks are finding this very interesting.


MICHAEL F. BENNET (01:01:12:16)


Well, I don't know if they are, they're probably not, because they're like my you know, I'm my mom and my dad are watching me. And these knuckleheads on the committee won't shut up. So we will stop. But let me let me just say on education, though, because you raise it and this is a place where I am just infuriated myself about Congress and about the federal You know, we have had yet another in the last month.


We have had two sets of reports about what's happening to America. Kit, American kids, a man you have missed it in the wake in the.


RON JOHNSON (01:01:48:01)


Wake of our return to regular order.


MICHAEL F. BENNET (01:01:50:09)


In the wake, the adult supervision has returned. But in the wake of COVID, you know, and all of the educational loss that's happened, all of the at least in my state, the mental health epidemic that's occurring among adolescents and in America. And and here we find ourselves once again posting horrendous academic outcomes for kids. We're failing on the latest NAPE stuff.


We're failing on the latest other assessments. And, you know, that's not a topic that ever comes up around here like what you about.


RON JOHNSON (01:02:29:03)


We don't want to discuss our failures.


MICHAEL F. BENNET (01:02:31:10)


Well, we also, you know. All right, Senator Thune, you're here.


RON JOHNSON (01:02:35:17)


Thank you very much, Mr. Chairman.


MICHAEL F. BENNET (01:02:36:24)


Thank you, Senator Johnson. I appreciate the conversation. You're going to be able to put these folks back on TV with their moms and their dads and their families. They can. I'm listening. They're erudite.


JOHN THUNE (01:02:48:00)


This is a fairly robust conversation.


MICHAEL F. BENNET (01:02:50:09)


Good pause. And our colleague follows on since we've got. All right, Thanks.


JOHN THUNE (01:02:53:23)


So thank you, Mr. Chairman, Dr. Corinth. And, you know, I'd like to start with you. In your testimony, you raised concerns with the validity of studies from the National Academy of Sciences and the Census Bureau touting the effectiveness of morphing the child tax credit into a child allowance. You also challenge the various studies that claim impressive results from the American Rescue plan, tax changes to the credit, and particularly its impact on child poverty.


It's a lot to unpack, I realize, but could you expand on these issues, specifically outline the flaws or data gaps in each of these studies? And then in addition, you note that you did your own simulation of what impact shifting the child tax credit into child allowance would have on employment poverty. Could you perhaps tell us a little bit about your findings as well as respond to arguments that your concerns are overstated?


KEVIN CORINTH (01:03:50:02)


Thank you so quickly. So the first study was the National Academy of Sciences study, and there it's very simple. They failed to recognize that the child tax credits work incentive was eliminated when we fixed the error and applied all their other assumptions, you get 1.3 million people leaving the workforce. In terms of the 2021 studies, One of the problems is that lots of things were changing.


At the same time. So not only did we get the child allowance, we also had child care assistance being extended. We had vaccines being rolled out, schools opening up again. So it's very hard to isolate the effect of the child allowance as opposed to these other factors. And the other issue, of course, which I mentioned in my testimony, is that when you have a temporary six month policy change, it's going to be a lot different than how people would respond to a permanent change.


And then finally, in terms of the study that my coauthors and I did, you know, we we were the first study to actually recognize and model the work incentive effects of this policy change. We also use by far the highest quality data set, and we linked survey data with administrative tax records and government program data to get much more accurate incomes and to identify those people who are most likely to respond to the incentives.


So when we use that higher quality data and use and actually recognize the work incentive changes, that's when we find that, you know, 1.5 million people would would leave the workforce.


JOHN THUNE (01:05:28:14)


So as you know, the Tax Cuts and Jobs Act that Congress passed in 2017, doubled that maximum child tax credit amount to 2000, allowed most of it to continue to being refund refundable for those with sufficient earnings up to an inflation adjusted cap, which is currently around 1600 dollars. Under current law, this increased child tax credit will be cut in half if Congress doesn't act.


So could you please speak the importance of the child tax credit credit as it's currently structured and the benefit that it's providing to American families today?


KEVIN CORINTH (01:06:00:21)


So the existing child tax credit sort of has a triple bottom line. It encourages work, reduces poverty, and invests in the long run success of children. The Tax Cuts and Jobs Act did a lot more than that, boosted economic growth and increasing wages across the spectrum. So I would say it's vitally important to make that permanent after 2025 would otherwise expire.


JOHN THUNE (01:06:27:00)


Dr. Rachidi, In your testimony, you speak to how the American Rescue Plan temporarily revamped the child tax credit. And one of the changes that it made was paying it directly to individuals without any taxable income, thereby removing the historic incentive for credit beneficiaries to be working and turning it into a as we've talked about, a child allowance, should the American Rescue plan version of the child tax credit be resurrected?


Could you speak to some of the negative impacts, including impacts on workforce participation that you would expect to see among those claiming the CTC?


ANGELA RACHIDI (01:07:01:00)


Sure. Thank you for the question. I do have concerns both about making it fully refundable for households, as well as eliminating the phase in which has the work to work incentive that Kevin is talking about for the nonworking families. I have concerns for a couple of reasons. One is we have a large body of evidence from the nineties and I agree we're not in the 1990s, but I also don't want to return to the 1990s.


And so the making the child tax credit available to nonworking families would actually be larger a larger benefit to those nonworking families than AFDC was in the nineties. And we know that that had very bad effects for for families and so I'm concerned about that. The other thing I'm concerned about for nonworking families is currently we have a fairly robust social service system for those families in terms of SNAP, TANF, other benefits when you when you when you turn that into a child allowance, it removes a touch point from the social service sector.


And I have concerns about what's happening in households when there's no work in the household and just kind of removing that that touchpoint is concerning, I think, from a from a child perspective.


JOHN THUNE (01:08:12:02)


Well, and just to follow up on that, you pointed out in your testimony that there are these other federal programs that do have do not have a work requirement component, are therefore targeted at helping those who are unable to be employed for one reason or another. So could you just enumerate again or outline for this committee what some of those federal programs are and why paying the child tax credit to those without taxable income duplicates these other efforts and reduces the effectiveness of the child tax credit.


ANGELA RACHIDI (01:08:39:03)


It very much duplicates the existing system that we have. We currently have Temporary Assistance for Needy Families, which is primarily targeted to nonworking, mostly single mother families. It provides childcare assistance, provides a lot of other support services. We have SNAP, which is formerly food stamps, also available to nonworking families. So there's a fairly robust safety net that already exists for nonworking families.


So that's why a CTC with the phased in with the work incentives that's only available to working families is such a positive policy because it encourage ages with that work and it gives those nonworking families the incentive to get into the labor market, to provide them not only the opportunity to escape poverty, but also that employment will help them move up the income ladder.


JOHN THUNE (01:09:27:02)


So you referenced in your testimony this Penn Wharton budget model that reviewed the American Rescue Plan, CTC changes, and it found that the benefits of the changes are not targeted at those families in the lowest income brackets. So could you speak interesting or if you could broadly, at least to those distributional effects of the American Rescue plan, see changes on, families in various income brackets, as well as the distributional effects of the advance payment specifically?


I think there's an impression here that those changes impact or distributed among people with lower incomes, families or lower incomes. And I'm curious as to what you have seen, you know, while that was in effect and and maybe can speak to the distributional impacts of that change that was in place temporarily?


ANGELA RACHIDI (01:10:23:13)


Yes, it's a good question. I mean, because the expansion of the child tax credit was so large and reached so high up the income scale, it was neither strictly an anti-poverty policy nor was a tax relief. It was kind of a mix of both. So if you think of the expanded child tax credit as necessary to reduce child, it really isn't targeted well towards child poverty because the Penn Wharton model and even the data that we have on what family families receive, the benefit less than 50% was actually targeted in terms of expenditures targeted to the bottom two quintiles of income, which means middle and higher income families got about half of those benefits.


And so but that's that's a design choice. And, you know, I think the perception is that because it was made fully refundable and went to nonworking families, it was strictly an anti-poverty policy. And most of those benefits went to those households. But in reality, it was much more distributed across the income spectrum. And like I said, not really truly tax relief, but also not strictly an anti-poverty policy.


JOHN THUNE (01:11:31:02)


Thank you, Mr. Chairman. And I would say just simply in conclusion that in my state of South Dakota right now, the unemployment rate is, if you can believe this, under 2%, and if, in fact, what you're saying in your analysis, Dr. Cornell, is accurate, and that is that there we're going to lose. It's going to cost us a million over a million people.


We're going to go back into the workforce, need people in the workforce and in. If it's also true that, as Dr. Rashidi has pointed out, that the distributional effects of this do skew toward the end as well as told people in the lower income categories, it perhaps is keeping a number of people out of the workforce. Thank you.


MICHAEL F. BENNET (01:12:07:01)


Thank you. Thank you, Senator Thune. I will I'm going to defer to Senator Warren because she's here. It's her turn. But I would say, one that Dr. Rashid's testimony, I think, confirms what's reality about the child tax credit, which is that it both is an anti-poverty measure and a measure targeted at America's middle class. And that's why you see the distribution.


You know, unlike the the Trump tax cuts, which I'll go through in a second after Senator Warren, where 52%, 52% of the benefit went to the top 5% of Americans, as Dr. Rashidi said, the 50%, just over 50% of the tax credit that we put in place in 2021 went to the bottom 50% of Americans. That's true. And that was the design.


So America, it does consistent choices. And we're going to have to make choices about whether we want to. Kentucky could cut taxes for the wealthiest people in America again and expect it to trickle down to everybody else, or whether for once we're actually do something for working people and for people living in poverty. So do you have something Do you want anything to sit?


JOHN THUNE (01:13:21:00)


Well, no, I.


MICHAEL F. BENNET (01:13:21:12)


Would because I don't want to leave.


JOHN THUNE (01:13:23:05)


The only thing I would say to that is if you look at again in the course, it's surely when people are paying more as a total in totality, you're going to see more tax benefits. Probably when I'm talking about volume. But when you're talking about percentages, what happened with the Tax Cuts and Jobs Act in 2017 is in fact.


If you look at who pays taxes, the burden, the tax burden relative to what it was prior to 2017 and after, people with higher incomes ended up paying more, not less.


MICHAEL F. BENNET (01:14:02:17)


And I think the question and the quote you and I actually had this debate, I don't know if you remember, but we had it back then. I will leave it for a moment and we'll come back to it. Senator Warren, thank you for coming back and please take the time.


ELIZABETH WARREN (01:14:15:11)


Yes, thank you, Mr. Chairman. So too many families walk a tightrope to try to make ends meet. And that is why Congress established the child tax credit to try to help families pay for like diapers and daycare. During the pandemic, Democrats increased the value of the CTC and expanded access to more low income families. The result was one of the most effective anti-poverty programs ever A record 3 million children lifted out of poverty, child poverty slashed in nearly half within the space of a year.


But congressional Republicans continue to insist on what they call work required. It's for the CTC and other critical programs I call these unworkable requirements. This is an old trick of using a maze of red tape to deny families the help they need while not actually promoting employment. Now, Mr. Gupta, you're the director of the Center for Law and Social Policy and an expert on poverty.


So tell me, have work requirements when applied to the CTC, to Medicaid, to SNAP, to Tanna whenever they've been applied, actually helped families find good jobs and escape poverty?




Yeah, no data show that the CTC refund ability doesn't stop parents from working. I just want to remind folks it's completely different than the old pretend. If AFDC program does not phase out dollar for dollar at some point. You do not have less access to health coverage after a year as you did then. So look, the. The main effect here of work requirements is to make it harder for people to access benefits.


We tried this in Arkansas with Medicaid under the Trump administration and there was no impact on employment, but they did kick one in four adults off of health coverage, even though 95% were either already working or qualified for an exemption.


ELIZABETH WARREN (01:16:19:20)


So some see that again. So they put work requirements in place and the consequence was not to boost the number of people who were working at all. But you did lower the rolls of people who got the benefits that they were legally qualified for. And you said what portion lost their benefits?



One in four and --


ANGELA RACHIDI (01:16:41:23)


One in four. So all of this red tape has not helped people find work, but it has cost millions of people the help that they need and wasted the time of millions more. And it's not just families that get buried under this mountain of paperwork. The government actually has to administer it, and that's not free. So, Mr. Gupta, in addition to costing families their benefits, can you tell us a little bit about what work requirements actually cost the government?




Yes, you're right, Senator Warren, Administering these complex rules inevitably cost the government money. So, again, if we look at when the Trump administration tried to apply work in Medicaid, the Georgetown Center for Children and Families estimated costs for states that were interested or in the case of Arkansas, actually implemented the program. And they found that the costs varied from tens of millions a year to hundreds of millions of year in just implementing the work requirement.


So this is not a path toward simplifying.


ELIZABETH WARREN (01:17:48:14)


Okay. So work requirements don't actually promote work, but they do cost millions of Americans benefits and they cost the government hundreds of millions of dollars to administer. But there is one group that actually profits from these work requirements, not the government, obviously not the people who who need the help, but instead it's the for profit contractors who are hired to administer these programs.


Maximus, for example, has contracts in more than half of the states to administer eligibility rules for Medicaid. SNAP and Tannis, and they have raked in billions of dollars shoving families off their benefits if those families can't run through the maze. So, Mr. Gupta, in your opinion, do work requirements for help anyone besides the private contractors that get paid to administer them overwhelmingly?




No. They distract from a lot of the things that actually boost incomes, improve health and other outcomes. We talk about the nineties, often the 96 welfare. Well, we need to acknowledge the big boost in the earned income Tax credit. Child care spending, raising the minimum wage, running a tight labor market, all of which I think we're much more effective.


Yes, private contractors are paid millions of dollars to administer these programs and have been busy, busy lobbying Congress and states to expand the requirements in order to increase demand for their services. That money could be far better spent directly supporting families.


ELIZABETH WARREN (01:19:19:16)


All right. I agree with you. We need to stay focused on policies that actually help struggling families and invest in our economy. And that means restoring an expanded child tax credit and opposing Republican efforts to try to tear another hole in America's safety net and use a maze of red tape that has been proven of failure every it's been tried.


Families need us to get this right. So I hope we can get this done. Thank you, Mr. Chairman.


MICHAEL F. BENNET (01:19:50:12)


Thank you very much, Senator Warren, for for being here, for your leadership. I also want to I want to recognize Senator Brown, who was the coauthor of the of the of the American Family Act that we did right. Dr. King, for two years before this study that you've invited here this morning, which was not didn't form any basis for that bill.


But I do want to say that none of the progress that we would have made if one considers that progress to cut childhood poverty almost in half would have happened without the leadership of Senator Brown. And I want to thank him for that on behalf of the kids in Colorado. And I'll turn it over to you.


SHERROD BROWN (01:20:32:05)


Thank you, Mr. Chairman. As you know, I share that credit with you, certainly in the work you've done. And we've been working on this for a lot of years. And I have said many times, and I know you concur, that the best day of my career was March six, 2021, when I was sitting next to Senator Casey on the floor and turned to him and talked about that.


We had a couple other things that matter in that Tube, a pension bill, too. But I remember after that we all kind of teamed up and talked to Secretary Yellen, that the president signed it and he went to the IRS commissioner at Trump, who was a professional and not only didn't stand in the way, but accelerated it by July of that year, we had by July that year, the checks went out to 60 million, the families of 60 million children, 2 million in my state, 2 million in Pennsylvania, hundreds of thousands in Colorado.


The child poverty dropped by 40%, not quite immediately, but quickly. And it's the way government supposed to run. We do something. We listened. We listened to people like you. We acted as a group. Senator Bennet was a real star in that. And we we passed a bill. We made sure it was implemented. We got the ministration do it right and look what happened.


Unfortunately, we were not able to make it permanent. That's the mission. I know the three of us on this panel are committed to. So I'll start with Mr. Dr. Gupta and Mr. Moore. You both met your testimony. The research tells us that permanently, permanently expanded, CTC would cost taxpayers $97 billion per year, but it would generate literally ten times that an annual economic stimulus fee, a future earnings tax contributions.


And I love the back and forth between Senator Bennet and Senator Thune. I like Senator Thune. I just think he's colossally wrong when it comes to tax cuts for the rich, which do very little but shift the tax burden to the wrong people. But what what Senator Bennet said about what this means, what the two of you and I will let you answer in a second.


But the two of you have said we talk a lot about the cost. Conservatives talk about the cost. People that want tax cuts for the rich talk about the cost in this. Never talk about the benefits. So tell us more about the cost benefit analysis you mentioned, both of you, Mr. Gupta and Mrs. Michelmore if you would.




Thank you for the question, Senator Brown. Yes, I'd be happy to talk about that. Some of my own work in this area, and I think from other mounting evidence suggests that when kids get more income in childhood through tax credits like the earned Income tax Credit, they go on to have much higher earnings in adulthood. And so I think that's a big component of the benefits that have been calculated.


They've also been shown to reduce health, health costs in the future and reduce costs through things like reducing crime.


RON JOHNSON (01:23:17:21)


Thank you, Mrs. Michelmore.




And Senator Brown, first, thank you for your extraordinary leadership with Senator Bennet on this issue. I would just add that it also reduces interaction with the child protection part, Child Protective Services, child welfare system. So we're keeping families together, which I think is hugely important. And, you know, we're talking about nearly two dozen studies. And in many ways we can actually isolate the impact of income itself as a transfer.


And I think we have very good reason to believe in some ways that these estimates might even be conservative. So just imagine, we talked about being in the private sector. If you could get a 9 to 1, 10 to 1 return on investment, how foolish would you be to not make that investment? This is an investment that only the United States can make.


Only the government can make.


SHERROD BROWN (01:24:08:22)


And you think of that economic growth just overall and how that that that really is a case of lifting all boats, not tax cuts for the rich, but directly investing in workers and the working poor in the in the middle class and workers generally. One of the things I wanted to mention to Benedict, he called this hearing in part to highlight the bipartisan history of CTSI.


I worked on it. I work with Senator Cassidy, Republican from Louisiana. We worked on a number of things together. He sits on this committee on a temporary measure that strengthens CTSI. During the pandemic, many families saw their wages take a hit because they got laid off or saw their hours cut. That, in turn reflected the amount of their additional CTC.


So Senator Castillo and I got a bill passed that allowed families to use their 2019 wages instead of 2020 wages for purposes of the CTC. We call it the lookback option. And again, we got got it done bipartisanly. It had broad support when families filed their taxes in 2021. Mr. Gupta, tell us why this would be so important to working families.


It became permanent law.




Yes, Senator, as you describe the tax credit, look back really helps folks when they face wage reduction or they lose their jobs and they have the option of figuring out year would give which year of income would give them the higher benefit. And this happened obviously a lot in the pandemic, but it happens all the time.


RON JOHNSON (01:25:34:12)


Yeah. Let me let me interrupt and explore that.


MICHAEL F. BENNET (01:25:36:13)


And sorry, take whatever they said about take whatever time.


SHERROD BROWN (01:25:40:05)

Thank you. I assume I assume the people that benefit centrally and the most from the CTC, or if in fact there is there is data on this, I would assume it. But are people whose incomes are more like this right. That they are likely to pass in and out of good, good or better or worse, jobs likely to get laid off, like to have their hours cut, likely to not have child care.


So their hours are different. Is that is that probably generally right?




Yeah. We have good reason to believe that there's more income volatility at the very bottom of the income distribution and the low paid, low wage labor market itself often treats workers, especially during an economic recession, as quite disposable. So I think that's right. I just want to add that one other thing that you've pushed for. Full refund ability helps with this problem.


For what full refund Ability says is, look, you may have lost on the job, you may have even lost your job, but we're not also going to cut the child tax credit. You at least have that floor. You don't have to then pull your kid out of afterschool programs. You don't have to stop the music lessons. You don't have to cut back necessarily out of the nutritious food you're providing.


So the look back option is a terrific option that you all enacted temporarily and full refund ability as well, actually really helps with this challenge. It helps smooth incomes and people's consumption.


SHERROD BROWN (01:27:07:17)


Thank you, Mr. Chairman. Thank you.


MICHAEL F. BENNET (01:27:09:00)


Thank you. Sit around very much. Appreciate your leadership here. Senator Casey.



BOB CASEY (01:27:15:12)


I want to thank Senator Bennett for presiding over this hearing and in a larger sense, thank him for his leadership on the child tax credit. All these years, as well as Senator Brown, culminating in that moment when we passed the American Rescue plan, the first vote that we had to have two votes over the course of about three weeks.


The first vote passed at 534 in the morning. Not that I remember, but I remember the moment that passed. And we all appreciate what was done in the lead up to that. Over the many years before the American rescue plan. But in my judgment, the current child tax credit isn't it isn't enough for families that we should have version that we enacted in the American Rescue Plan.


Also, when I consider the last 40 years is my view of the last 40 years, the tax codes have been rigged.


Over and over and over again.


For big, big companies and very wealthy Americans. I think that's not just my view, and it's a view of a lot of people in the American Rescue Plan. With regard to the child tax credit provision. We finally said we're going to we're going to choose as a as a as a body in this case, the Senate with a very limited vote on one side.


But we got it passed. We're going to choose to help families who are trying to raise their children, trying struggle through a pandemic. And we're not going to do anything in this bill for big companies and wealthy Americans. They've gotten a lot over.


Those 40 years.


So we made the right choice. But as much as we can talk about the data, you've heard the data over and over again. You've all testified and you bring great expertise. And much as we testify about the data, about the impact on families. Some of it can't be measured in numbers, the impact of this tax credit on the lives of families and lives of children is literally immeasurable, incalculable.


Here's just some some examples of just a few examples in our state. Jim and Judy from Apollo, Pennsylvania talked about using the tax credit for paying for medical and dental care. Kenya from from Philadelphia talked about paying of paying rent, feeding her, feeding children, paying bills, buying shoes. The person from Scranton talked about eyeglasses for her children. Joy from Glenside talked about preschool.


And child care, paying for that with the child tax credit. Stephanie from Glen Rock food on the table. Rebecca from Philadelphia Mortgage or food and Laurie from Warfield, Pennsylvania, paying for her daughter's dance classes, protecting her social emotional health and teaching her resiliency. You cannot measure that impact. There's no way that we can measure the positive impact that this had on people's lives.


I sat with two mothers in the Lehigh Valley on the eastern side of our state. Two of them, between them, they had about, I think, six children, as I remember. Both of them said we can pay for school activities. We could never afford before. How do you measure if a child could be part of being a science club or in a music?


He got more. How was an a some kind of a music after school program.


Or an athletic.


Endeavor of some kind? How do you measure that on the life of, that child? And the problem is we should continue that. And so I wanted to start with you, Mr. Dr. Gupta. You testified that there are also you talked about the long term benefits of the child tax credit. You said that EITC and CTC increases a child's test score by 6 to 9% standard deviation. Tell me more about the long term benefits I was in here for for your live testimony. So tell me more about the the long term benefits for children.




Yes, Senator Casey. Children benefit in numerous ways that we have been able to measure, although I think you're exactly right. Some of the impacts are really best understood through these stories. But they benefit with higher earnings as adults and improved health, as Dr. Michelle Moore also testified, including longevity. We have reason to believe that they live longer because of these sorts of investments when children are exposed to these sorts of cash supports.


They're also less likely to have children as teenagers or young adults, and they're more likely complete higher levels of education. And in turn, we know they do better in the labor market. Mm hmm.


BOB CASEY (01:32:16:04)


Well, and I know I'm almost out of time, but I don't want to I don't want to go too far over my time because the chairman's in very patient with our our time today. But last point I'll make is, I guess as I know there was there was some debate here in the aftermath of the passage about the effect on jobs and some how this would be a disincentive to work.


Well, 2.2 million families in Pennsylvania better will 2.2 million children, their benefited in Pennsylvania. That's about 85% of the children in our state. But I think it's 2.2 out of 2.6 of, if I remember correctly. So that passed. And yet today we have, I think, the lowest unemployment rate we've ever had. So I'm not sure that that argument holds much water.


But I think the one part that that's missed in a lot of our states is most of what. My state is rural.


At least by by geography, but also substantial population. We've got about three and a half million people live in rural communities, 48 counties.


And if I look at the list and I'll just give you three, three or four examples.


Here's in different geographic regions of the state, Crawford County, up just south of Erie, in northwestern Pennsylvania, rural county, 16,000 children. Fulton County down by the Maryland border, a very small county, only has 14,000 people in it. 3000 children benefited in Fulton County, Mifflin County, 9000 children. It's a small population. County. Rural county. 9000 children. Susquehanna County up where I live near Scranton. Again, a rural county, not a big population. 7000 children there. So this benefited children in low income urban communities, small towns and rural areas disproportionately in a very positive way.


But even even in our suburban counties where sometimes people think families are better off, 70, 80%, sometimes of those communities benefited as well. So, Mr. Chairman, I can't say more about the positive impact this had on people's lives in ways as as Mr. Gupta just said, in ways.


MICHAEL F. BENNET (01:34:35:01)


That are measurable, in ways that are literally immeasurable. And I want to thank you for your ongoing leadership. I want to thank you, Senator Casey. I mean, your description of the people that you're meeting in Pennsylvania is exactly the same as what I'm seeing in Colorado and what I saw when I was superintendent of the Denver Public Schools.


The problem in America is that people won't work. The problem in America is that we've had an economy for 50 years that has grown for the very wealthy. It's grown incredibly well for the wealthiest people, and it has not grown for anybody else, including when we've had periods of economic growth, which, as I mentioned earlier, have actually been recessions for working people in this country.


And I don't think any defender of capitalism can defend that set of outcomes. You know, I still believe we can create a capitalist economy in this country that want to grow as it grows for everybody. But that's what we have to do. And in the meantime, for people that just have a bare minimum expectation for what it is to be have a middle class life in America, you know, to be able to afford those a little bit, maybe a music lesson or a music or a or some back to school clothes without, you know, being unable to pay the rent or be able to feed their family.


You know, these are family. These are families that are not on the public dole. These are families that are working every day. A lot of times two and three jobs, you know, to to be in a position to hope for the best for their kids. And I agree with you that you can't possibly quantify what the value is of that.


You know, the family I mentioned earlier who bought a bicycle for their kids so they could so they could stay at work and work a little extra time while their kid was there. But it is probably impossible to quantify the value to our nation. But, you know, we are living in a world now where we are the richest country in the world and we have one of the highest rates of childhood poverty, the industrialized world.


We don't have to accept that. That's what we showed when we passed this. Thanks for being here. There was some discussion earlier about distribution tables, some there are some arguments that we should expand the trunk or extend Trump tax cuts because of what it has done for the American economy. There is some complaint about the amount of money that had been spent on the child tax credit.


I wanted to get into this question with Dr. Mitch Moore And Doctor, due to Dr. Gupta has an excellent. Oh, thank I'm sorry that it's taken me that long to figure it out. But I do think that life, as Senator James would say, those consistent choices I've been baffled by the choices that Congress has been making, been baffled by the choices that, you know, some colleagues on the other side have been making around when it comes to taxes, you know, and and what it's about.


Well, let me let me read the question then. I'll tell you why. I think it's baffling. I just want to remind everybody about the Trump tax cuts. If they are extended, as Dr. Corn said they should be, they're going to have an annual cost of $350 billion a year unpaid for. Not a dollar of that has been paid for $350 billion a year.


That is more than double what the expanded child tax credit and earned income tax credit from 2021 cost. The difference between these two things is that the Trump tax cut overwhelmingly. To a degree that's almost impossible to imagine or fathom, helped the wealthiest while leaving pennies for low income families. It is so hard to believe this that I hope people will pay attention to this, especially People who supported the Trump tax cuts and the idea that somehow it was a middle class tax cut.


As I mentioned earlier, when we were having the conversation with Dr. Rashidi, and I'll ask anybody who wants to refute these distribution tables, if they can refute these distributed tables, half of President Trump's tax cut went to the top 5% of Americans, half, half. That's 7.5 million people out of a country of 330 million people, 7.5 million households, to be precise, with an average income of almost $800,000 they got because of the Trump tax cuts that some want to extend, they got $150 billion tax cut from Donald Trump.


At the same time, the bottom 40%, you'll see it over on that end where you've got the the poorest 20% and the second 20%, the bottom 40% that unlike the top 5%, which was 7.5 million people, the bottom 40% is 63 million American households with an average income not of $800,000, but of 22,000 votes. To come to Dr. Rashid's point, that's that's the that's the that those those columns represent where we put half of our of our credit.


The rest of the half goes into the other by and large, other working people, they're but those folks that were at the bottom, those little red lines at the bottom, they got 5% of the Bush tax cuts, the two lowest quintile. You know, groups in America got 5% of the benefit. The richest 5% got over 50%. None of it was paid for.


I wish my colleagues were here to have this discussion right now. None of it was paid for. Life consists of choices, as people said. And when I go home to read parts of Colorado and Blue Card's part protocol and I take this distribution side with me, they think that we've been smoking something that's now legal in Colorado or worse, that that's what they they can't believe it.


You're going to see the economic distribution in America in a minute. But they know they know the last 50 years, you know, since, you know, we began this trickle down economics and this outsourcing to China and Southeast Asia. And, you know, they know that the people that have benefited from living in that global economy because of their education and by the way, I hold nothing against them.


You know more power to people that have succeeded in an economy that you know, hasn't worked for most people. You know, they have worked hard to earn what they have earned. But it is impossible to look at these slides and not realize the benefit that, you know, the last 50 years have accrued to them and the lack of benefit that literally as a group to everyone else in America.


And when I go home and I describe this, people say, say the same thing. Senator Johnson says, which is this is so complicated, I'm not sure I understand it. And what I say is, okay, well, let me give you an example. This would be like if a mayor in the Trump tax cuts would be like if a mayor in Denver or Durango or Grand Junction or Cortez or Greeley or Colorado Springs or Pueblo or Alamosa or Springfield, if any mayor.


And by the way, those are Democratic places and Republican place, if any mayors said to their constituents, I am going to go borrow more money than we've ever borrowed before, and their constituents, being Coloradans, would say that concerns me. I'm worried about that. Why? You're going to borrow more money than we've ever had before. What are you going to do with that money?


Are you going to invest in our schools? No. Are you going to invest it, you know, to combat the mental health epidemic that American children are facing as a result of COVID and the way social media has interacted with them? No. Are you going to invest in our water infrastructure, which we desperately need? No. Are you going to invest in our libraries, our roads, our bridges?


No, no, no. What are you going to spend the money on that you're to borrow all this money from from from our children to pay for. We are going to take more than 50% of it, and we're going to give it to the top 5% of taxpayers in the city and expect it to trickle down to everybody else.


We're going to give it to the two richest neighborhoods in town and expect it's going to trickle down everybody year. That is the set of values we're pursuing. We're going to borrow it. We're not going to pay for it. We are going to borrow every single penny of that. And by the way, we're going to chastise people that try to do anything else for the people that are at the lower end.


But we're going to borrow that money, send the benefit to the two richest neighborhoods. And I hope somehow that's going to benefit the rest of us. That was Donald Trump's tax policy. I hate to say it, but true, The numbers don't lie. Those were what the numbers were. And let's remember, let's put this up. And Senator Wyden has some coming right to you after I ask this question.


Let's remember the backdrop here, which which I've been talking about all morning long. This slide goes from 1973 to the present, although you could take this all the way back to the Great Recession and what it shows is that the top 1% of Americans, that's that red line at the very top, the 7.5 million wealthiest Americans, are the ones that have seen the fastest income growth over that entire time.


They've decoupled from everybody else. Everybody else almost has been flat. If you squint even harder, you see the top 100th of 1%, which is 25,000 Americans who benefited the most from the from the Donald Trump tax credit. President Trump tax credit, who are economies has reaped the biggest benefits. This is a tragic story in our country, tragic between the First World War in 1980, average average incomes grew from 4 to 5 million for the for the wealthiest.


That's not a hugely. But since 1980, these incomes have grown to an astonishing $32 billion a year. That's an unimaginable amount of money. And life is about choices. President Trump made a choice to reward the wealthiest people among us, and he made a choice to leave the rest of America behind. That his choice, they masqueraded. They made it look like there was a middle class tax cut because they had a little bit of a tax cut there.


But it was tiny in volume compared to what the rest of the credit look like. And we made a significantly different choice in 2021. It's true. Dr. Rashidi. I think our choice was far more targeted than you were saying and far certainly far more targeted than the Trump tax cuts. If your effort was to try to provide some relief to working people, if your effort was to provide some relief to the middle class.


And we said, as you said, as you testified, half the tax cuts to the 63 million poorest households, and it's a choice that I am happy to defend in red parts of Colorado and blue Portugal. And let me just get out of the way of of Senator Whitehouse. So actually, I will. Well, let me just say, could you compare Doctor Mitchell Moore, Doctor do to get to to good could you compare the wisdom and long term benefits of the expanded child tax credit versus the Trump tax cuts?


And I'll come to you guys in a minute, but let me do this and then we'll come to Senator Whitehouse. Senator Cortez Massad Thank you, sir.




Yes. So the Tcja or Trump tax cuts, as you pointed out, made a series of changes that mostly benefited middle and upper income households. And I will just note that your chart, if we could pull it back in time, you are right to say that the top decoupled because actually from 1943 to 90, really the postwar period, 1945 to 1973, all of those lines would have been growing together.


And that stopped right around 1973. So this made particularly little sense in light this long term trend. But just to give an example, a full time year round minimum wage worker benefited with a $45 increase due to the Trump tax laws. Child tax credit changes. Well, somebody's making $400,000 a year and a married couple could benefit. Each of them have two kids, could benefit with a $4,000 increase.


And I'm sorry, but it doesn't cost nine or ten times as much for a wealthier person to afford the same necessities for their kids. So this was absolutely a question of priorities. And the Trump tax law exactly how we need to focus on refundable tax credits, particularly for refundable if we want to deliver support to families through the tax code.


MICHAEL F. BENNET (01:48:57:09)


Dr. Mitch Albom and then write to you, you're and I'll come I'm going to go to Senator Whitehouse and then we'll come to you.




Thanks. I we have a vote pending. Please go tangled in a complicated go ahead. I just wanted to make a brief point because I do have to get to the floor. In Rhode Island, we saw a test fire of the child tax credit and it was a phenomenal success. It made a difference in people's lives. A woman from Crystal from Pawtucket said it helped when child support payments dropped below the mandated amount.




I'm still in significant debt, but working remotely has allowed me to save on gas and the amount that I receive from my team allows me to put more money towards paying down that debt. So that's one experience. Helped her work remotely. The other one was a woman who, from Providence talked about her kids and her ability for them to, quote, purchase grocery, food, diapers and baby formula.


Diapers are very expensive and child care mark that child care costs are soaring. I don't want my baby to go without. It's not the children's fault. Their parents are poor. All families need help and it's time we start giving them the help they deserve. I understand that the argument has been proposed.


That by offering the child tax credit, we will encourage people to stay out of the workforce. In Rhode Island, our experience was exactly the opposite, and I think the logic of this is exactly the opposite. Child care is expensive with a child tax credit, you can afford child care. Once you afford child care, you can show up in the workforce.


Everybody I talk to when I visit employers in Rhode Island who are feeling workforce pressures says if people could afford child care, it would help me solve my workforce problems because it would add to my workforce pool. So I just want to rebut that argument from Rhode Island's experience. And just from a point of simple logic. And with that, let me turn it over to Senator Cortez Masto.


And I understand that she now has the gavel.




But thank you. Thank you to the panelists. I couldn't more. As you all know, it is such an important game changer for so many families to have that support for for many reasons. There's one really one question I have, though, and I'm going to direct it to Mr. Dutta. GUPTA The Tax Cuts and Jobs Act of 2017 denied the child tax credit to roughly 1 million low income children in immigrant families who lack the Social Security number, even though even though their parents face payroll and other taxes on their income.


Right. And so my question to you is, there are some really these are some of the most in need children in our country. And what is the long term impact if these children are continued to be denied benefits?




Thank you for that question, Senator Cortez Masto, and for your leadership on this issue. Look, one of the goals of the child tax credit is to reduce child poverty, and any exclusions are going to harm children, children who are growing up in this country and who are going to live in this country, by and large. So as you pointed out, it was up to a million children who were restricted because of this completely new requirement that was not in place before.


And folks are paying taxes. Nobody doesn't pay taxes in the United States. You can't function without paying taxes, sales taxes, property taxes, income taxes, federal, state, local, state and local often are more regressive. And remember, many of these children are part of mixed status immigrant families, which include U.S. citizen children as well. So the whole family can suffer.


There's estimates that restoring access to these children currently being excluded can have an impact of the $3.3 billion. As we discussed earlier, before you joined, we know the child tax credit helps children do better in school, have better health outcomes, reduce interaction with the foster care system, reduced interaction with the criminal legal system, and do better as adults, including through more schooling and better.




But let me just say, for those reasons, you see, there should be a distinction between these children and other children.




Know their children.




Right. And and their parents are paying taxes. And just like you said, they come from mixed families and they're in our communities. And so I just I can't stress this enough. I think that all because I know I'm preaching to the choir here, but this is such an important issue, an area because we don't want to leave any of our children out.


Clearly, there's more work to be done. And I, like my colleagues, support the child tax credit and I think it has provided benefits you all know. You see the data. We see the data. It's there. But I do not think we should quite honestly distinguish amongst children just because they are immigrants or come from an immigrant families. It's outrageous to me.


So I think you and I don't know if you have any other comments around here, but this is really such an important issue for me because there are so many families across the country that children that have been denied, which is outrageous, I think, on its own, and that we are not really fighting for all of our children.




And it just adds one more layer, one more obstacle, one more administrative burden to folks. So look at the end of the day, children are children. We don't have work requirements for attending public schools. And one day, I hope, will realize that a basic income is something every child deserves.




That's right. Thank you. Anybody have any other comments? Let me just ask anything else that has not been addressed that you would like to put forward in the hearing that hasn't been asked? Yes.




Well, we talked a lot about the war on poverty. And I just wanted to say a little bit about that. So one of the misunderstandings about the war on poverty is this idea that it was about income transfers. Income transfers had very little to do with the war on poverty. The war on poverty was primarily about human capital and health care.


So when we talk about how much we've spent since the war on Poverty, it was almost entirely Medicare, Medicaid. And we did spend some on education and workforce. But what happened afterwards, we realized that some of the error and we have a Republican president, Richard Nixon, signing supplemental security income for folks with disabilities. We have a Republican president, Gerald Ford, signing the earned tax credit.


Then on a bipartisan basis, we got the child tax credit and so on and so forth. But if if there was any failure in the war on poverty was that it did not try to address the underlying economic structure or systems rules, policies, and it did not do enough on transfers.




Thank you. Let me just say thank you to our witnesses for providing your incredible perspectives today. I want to say thank you to the chairman and ranking member Thune for their partnership in hosting this important hearing and to all my fellow members that were here. We would ask that any additional statements or questions may have for the record be submitted to the committee clerk by five within five business days from today or 5 p.m. next Thursday, July 20th, 2023, and I will say the hearing is adjourned.


Thank you.

 MICHAEL F. BENNET (01:56:12:18)

Thank you. This hearing will come back to order. And thank you very much for your patience. And I apologize for the miscommunication, whether we were recessing or not. I'm going to have to go back and vote another time or maybe I'll skip that vote. But, Mr. Gupta, can you talk a little bit about how the 2017 expansion of the Trump tax cuts on the on the CTSI differed?

‍You know, this is as I said earlier, we've had a history of bipartisan work on the child tax expansions as a really good reminder that, both parties have a reason to be proud of their work to get the credit to more low income families, which I hope can serve. I really do as a template for a bipartisan version.

And it's it's a part of my frustration with that Trump tax cut. Obviously, I'm very frustrated for other reasons as well, but that it provided $2,000 per child an increase to people making $400,000 while giving $75 to minimum wage folks. Can you explain how that expansion differed from the Bush era CTC expansions and the Obama Boehner, Ryan McConnell expansions in particular?

I'm interested in how those versions of the CTC treated low income families versus high income families.


Yes. Thank you, Senator Bennett. That's a great question. And as you pointed out, one of the main things the Tcja did after doubling the credit was to dramatically expand the income range for eligibility. So we went from 75000 to 200000 for heads of households, 110000 to 400000 for married joint filers. We had not seen that before. The Baker Bush Prior tax cuts and provisions around the child tax rate are consistently at least focused more on working and middle class families.

The one thing that the Tcga did that was helpful for lower income families was reducing the start of the phased in threshold from 3000 to 2500. But it did cap the refundable portion to 1400 dollars, which meant that unless a family or at least $600 per child in federal income taxes, they couldn't receive the full $2,000 credit. And so this is actually quite a break from the previous sort of tradition and history of the child tax credit.

MICHAEL F. BENNET (01:58:37:05)

I wanted also to get back to something we talked about Dr. Rashidi talked about a little bit earlier, which was that, you know, the comparison to the child tax credit to 1990 welfare, welfare reform and Dr. Mitchell more maybe I'll ask you about that. There's been a lot of debate over the child tax credit that has taken us back to that era.

And I've heard opponents, including today of the 2021 child tax credit expansion, argue that this would take us back to pre Clinton welfare programs, AFDC. You know, for the example we heard about today, the argument goes that cash welfare inhibited labor force participation and making the CTC permanent will do the same thing. We've heard that today. Could you explain why the 2021 child tax credit is different from the pre Clinton welfare or there was referred to this morning?

And in fact how it learns from some of that. What I agree with were problems with that earlier program.

Yes, absolutely. Thank you, Senator Bennett. I think we've come a long way since the 1990s in terms of how we structure means tested programs. So, for instance, in the 1990s, the AFDC program had 100% marginal tax rates, which meant that every dollar of earnings was essentially going to reduce your AFDC benefits for dollar by a dollar. We are far from that today.


So the CTC benefit phases out much more gradually under current law and under the 2021 reforms as well. And we also have a lot of other work supports in place now than we did in the nineties. So the Earned income tax credit is still in place and provides a very substantial work incentive for families. And we've decoupled Medicaid eligibility from AFDC, which allows families to still become eligible for Medicaid without being on a tanner for AFDC.

MICHAEL F. BENNET (02:00:25:23)

Thank you. Do you have anything you'd like to add?


The other thing that I would just note, you know, not only are you keeping the CTC as income rises, but we have also learned that from that period, a lot was going on, as Dr. Karin talked about in 2021. The same was true in the mid 1990s and part of the rise. A large part, I would argue from the research, the rise in labor force participation, unemployment, employment rates, especially among single mothers with limited educations, was also due to yes, the expansion of the earned income tax credit, but higher minimum wage, tight labor market, lots of childcare spending that we've all learned was hugely essential to folks getting to work.

MICHAEL F. BENNET (02:01:13:19)

And Dr. RUSCIO, happy to give you a chance to respond or tell me why I'm wrong. Dr. Cornett as well. I know that you've got a different point of view about it, and I just want to get on the record, whatever you'd like to put on the record.

ANGELA RACHIDI (02:01:28:04)

Well, sure. Thank you. I appreciate that. I mean, I agree that we are in a different position now than we were in the nineties to in terms of benefit reduction rates and things like that. I think the concern, though, is this is one step in that direction and kind of a return to those types of programs and kind of a reverse from what we have learned over the past two decades, much from Dr. Mitch Limbaugh's research on the ITC, that the work disincentive of the work incentive of the ITC has been really important for low income families.


So if we believe that research that has been so positive for children and families, I think we should also believe that taking away that work incentive, the phase in part of that could be detrimental to.

MICHAEL F. BENNET (02:02:14:04)

So much more. It's your research if we believe your research how Conductor Rushdie's sleep at night. On the child tax federal. Why should you be able to?


Well I think thank you. So I think the complicated thing with the ITC is it has both this work incentive and an income component and it's nearly impossible to disentangle those two things. But I do think that we have a growing body of evidence to suggest that it's the income that matters for children. We have evidence from, say, the Canadian child benefit system, which is not contingent on work, that it also leads to substantial improvements in child outcomes, very similar to the ones that have been found in the EITC.

So while I do think that the work component might be contributing to some of the impact that we see for children's outcomes, I think that the majority of it is plausibly driven by these by the income that the children receive.

MICHAEL F. BENNET (02:03:03:05)

Dr. Corinth?

KEVIN CORINTH (02:03:05:12)

Yeah, I think there's been a lot of agreement from economists at least, that the work component does matter a lot. There's been recognition that the EITC, which does have the earnings requirement, has more powerful effects for children than other benefit programs like housing assistance, which don't have that work requirement. So if nothing else, I do think it's a big risk if we take this step of going to this unconditional cash transfer that would de-link the cash from the work requirement.

MICHAEL F. BENNET (02:03:37:22)

And I hear you saying it's risk and there's your doctor. She's saying she's worried that it's a first step, that direction. I'm worried that if we don't take the risk to try, we're going to end up with millions of children permanently marooned in American poverty. We're going to end up with a workforce participation rate that continues to lag other countries around the world that have similar, similar child allowances.

I'm worried about how we deal with the fact that we don't unlike that, our competitors provide paid family leave or early childhood education or predictable preschool for poor families, and that this might be one opportunity to be able to say, partly to deal with the worries complexity, to be able to say, we're going to give parents the opportunity to make this experiment.

And I guess I would say I have four as well. I'd rather experiment that if we're making choices about scarce resources, then having another set of tax cuts that benefits the people at the very top, you know, which gives some tax cuts to working people in the middle class and see whether they spend it on their children, which is what I think.

I think at least the evidence pretty categorically shows about what people did in 2021. That actually is the subject of my next question for Mr. that a Gupta which is is about the how families spent the credit. You know, the average rent for a two bedroom apartment is 1300 dollars a month. And the average cost of childcare is $1,000 a month.

If you throw in groceries, a car, if you're lucky, health care, mental health care, after school programs and all the rest, not merge the quantum amount more that people who have more means in this country spend on their kids to make sure they've got the very best. And who among us who on this panel wouldn't do that for our kids and for our grandkids?

You know, the purpose of the child tax credit is is to provide a little bit of a margin to to to support kids in this country. And there's nobody you can spend a moment in in a town hall in my state, considering the last 50 years of the economy, We're talking about the the prices of housing, of health care, of higher education, the inflation that we face today.

Although I am happy to hear people up here talk about how low the unemployment rate is in their states, which is great news. And we got great news yesterday that the inflation rate is 3%. So some sign of progress. But I don't think you spent a moment in those town halls and not understand how this credit is a benefit, if only on the margin.

I said to help people who are working hard to pay bills, put food on the table and and pay the rent. And again, one of the things I really like about this child tax credit is not government telling you how to spend the money. There's no bureaucracy telling you what what to do. So could you explain what we know about how families spend the expenditure, child tax credit, and what specific things the CTC allowed parents to do?


Well, we know they spent it on food and groceries. And sure enough, the Census Bureau was able to document that food insecurity rates fell right around the time in following the time of those monthly payments. We also know they spent it on bills and rent on every day an essential, essential costs of raising children, including some of the activities and opportunities that we've discussed that promote social and educational development, cutting costs for musical instruments so a child can join a school band or for a birthday party for their child.

And in finally, we know that the CTC payments also help some parents work more hours. Many parents reported using their payments stored expenses like car repairs and child care, which helped them maintain. And I would just close quickly by noting if you really worry about the CTSI and its effect on work, you have to look at the effects on the second generation.

And it is it is quite clear that the effects on the second generation are unequivocally positive and unequivocally improve labor market outcomes. So even if you if you agreed with one outlier study out of seven or eight and believe that more than, you know, a very small slice of folks were affected and reduce their work in any way, we have to factor in the fact that the children who are in those families are going to work more as adults.

MICHAEL F. BENNET (02:08:12:12 )

I agree he's not coming. I'm going to put everybody here out of their misery and about to gavel this to closed. But I want to thank all of you for your testimony today. I really appreciate it. I, I really I hope you got a sense of the the how how important at least this is from my perspective. I mean, I really do think that we are going to have a hard time holding onto this democracy if we can't give the American people a vision for the future where they feel like if they're working hard in this country, that there's a future for their kids and that there's an economy that when it grows, as I said earlier, it grows for everybody. And I think we can still create that in America. I Think that, you know, the bipartisan consensus that's emerged about the last 50 year consensus on outsourcing and sending stuff to China and Southeast Asia and how cavalier we were about that. And I'd say Donald, is President Trump's sort of preternatural sense that that somehow gone wrong.

I think that provides one vector for thinking about what it might look like. I think that the, you know, investments that we're now making in this country and infrastructure, bringing the semiconductor industry back to the United States, leading the global transition on on energy, you know, which no other country in the world is well situated to do. We are well situated to do one of the massive headwinds that we face in addition to our health care system that continues to cost twice as much as any health care system in any industrialized country in the world.

And our lack of mental health care, in my opinion, is is the lack of outcomes from our education system, you know, which is reinforcing the income inequality we have. We see that we've got the same income inequality basically we've had since the 1920s and our lack of investment in preschool or lack of of quality K-12 education in our and the expense of higher education, those are all conspiring to to reinforce the income inequality that we have.

And I think it was in the midst of all of that, not as the idea that, you know, was that a simple tested policy approach created really by the exigencies of COVID, although not designed during the exigencies of COVID, that we turned to the child tax credit, As Senator Brown said earlier, for many of us, it was one of the proudest moments that we've had since we've worked here.

I do hope we can get to a place where we can create a bipartisan consensus around the parts of the child tax credit. I do believe that there is a bipartisan consensus in America that we don't need to cut any more taxes for the people at the very top and expect that it's going to trickle down. I believe there's a bipartisan consensus in America that that has compounded the income inequality that we have that's made it more difficult for families to achieve what they can achieve.

And I think people are ready to turn the page on that trickle down economics in all respects. And because of the distribution tables that I pointed out earlier, that clip more clearly than any other tax policy that anybody has ever dreamt up around this place, that this was an attempt to to make us to take a step in a different direction.

And I'm going to continue to fight for that because I think it's the right thing for the American people, the right people, the right thing for the people of Colorado. I want to thank very much the witnesses that were here to provide their perspectives. Both people called by the majority and called by the minority. I hope that you will to have this debate and discussion among yourselves as we get to a place here where we try to get to a bipartisan outcome.

I'd like to thank Ranking Member Thune and his staff for their partnership in hosting this important meeting or a hearing. And I would say to my fellow members, we would ask that any additional statements or questions you may have for the record be submitted to the committee clerk five business days from today or 5 p.m. next Thursday, July 20th, 2023.

Thank you very much for being here. This hearing is adjourned.

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