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Tax Reform for Families

An Earned Income Child Credit

Adam Carasso, C. Eugene Steuerle, Jeff Rohaly

Published: July 01, 2003
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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

© Copyright 2003 The Brookings Institution. Reprinted with permission.

This report is available in its entirety in the Portable Document Format (PDF).


Tax legislation enacted in 2001 increased the value of the Child Tax Credit (CTC) and made it refundable, meaning that cash payments would be sent by the IRS to those without sufficient tax liability to take advantage of the credit. These provisions were to be fully phased in by 2010. In May 2003, the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) accelerated the phase-in of the value of the credit (but not the refundability provisions), thereby increasing the CTC from $600 to $1,000 but for 2003 and 2004 only; the credit reverts back to its prior law value of $700 in 2005. More legislation is likely on this front. This brief argues that the time is ripe for an integrated credit that combines the Earned Income Tax Credit (EITC) and the CTC into an Earned Income Child Credit (EICC). The proposed EICC simplifies and standardizes the definition of qualifying children and those who may claim them, and indexes the new credit for inflation so that it retains its purchasing power over time. The EICC also provides enhanced benefits to low-income working families and reduces marginal tax rates. One version would cost $6 billion relative to current law (JGTRRA) in calendar year 2003.


This report is available in its entirety in the Portable Document Format (PDF).