Tax Day Tragedy: Congress Cut Taxes for the Wealthy and Left 19-20 Million Kids Behind

The Research Is In: The Child Tax Credit Congress Gave Us in the So-Called “One Big Beautiful Bill” Leaves Behind the Children Who Need It the Most

The so-called “One Big Beautiful Bill” (OBBB) that was passed and signed into law last July is being sold by congressional leadership and the Trump Administration as some sort of win for American children and families.

Hardly.

In addition to the tragic cuts of over $1 trillion to Medicaid and SNAP, two programs critically important to millions of our nation’s children, the bill’s Child Tax Credit (CTC) has failed the 20 million children most in need.

On these points, the research is in and is clear.

Proponents of OBBB will argue it increased the maximum Child Tax Credit (CTC) from $2,000 to $2,200 and call it progress. But a converging body of rigorous research from leading institutions makes clear that the bill’s Child Tax Credit provisions did not come close to covering inflation since 2017 (or even 2005), were poorly targeted, badly designed, and – most consequentially – left up to 30% of children with the greatest need with only partial benefits or none at all.

In other words, 20 million children will be left behind and receive only partial or no Child Tax Credit benefit because their parents make too little.

New analysis from the Institute on Taxation and Economic Policy (ITEP), combined with findings from the Tax Policy Center and two reports from the Center on Poverty and Social Policy (CPSP) at Columbia University, arrives at strikingly similar conclusions: the OBBB gave the richest families more and gave the poorest families nothing due to its inclusion of “baby and child penalties” in the legislation — an effective penalty created because parental earnings are “too little” to “unlock the full credit.”

That is not a design flaw – it is a terrible policy choice.

That choice has helped cause the child poverty rate to rise from 5.2% in 2021 to 13.4% (just under 10 million children) in 2024. As a result, the children who most desperately need the credit, including babies and other young children, victims of natural disasters, kids who have had a parent die, families with a parent or child with disabilities, families with caregiving responsibilities, kids in single-parent households, and other children in low-income families, received no benefit from OBBB.

This is a policy failure that Congress should reverse. And with Tax Day upon us, it is worth asking: “Whose taxes did Congress really cut? And whose children does Congress think count and which ones are left behind?”

What the Research Found: A Stunning Consensus

The ITEP report, published earlier this month, cuts to the chase: 30% of all children in the United States will be ineligible for the full Child Tax Credit in 2026 under OBBB’s rules. Children in the poorest fifth of American households will receive a reduced credit or none at all.

In sharp contrast, ITEP calculates that the largest share of benefits from the OBBB Child Tax Credit provision (41%) flows to the richest fifth of Americans, while the impact declines for each income group below that – dropping to virtually nothing for the poorest fifth. The average OBBB benefit for families in the bottom income quintile is $0. Consequently, the bill did nothing to cut child poverty. For the middle fifth, it averages $240.

In stark contrast, under the American Family Act (S1393/H.R. 2763), sponsored by Rep. Rosa DeLauro (D-CT) and Sen. Michael Bennet (D-CO) and previously by Sen. Sherrod Brown (D-OH) and my First Focus on Children colleague Chad Bolt – the most robust alternative modeled – the average benefit for the poorest fifth would have been $4,900, and $2,780 for the middle fifth. Child poverty would be cut by nearly half.

This matters especially given the broader economic context.

As ITEP notes, the Trump Administration’s tariff policies raised the price of the typical family’s baby products by approximately $400 in the first half of 2025. OBBB’s Child Tax Credit response to that burden? Zero dollars for the families hit hardest.

Columbia University’s CPSP reached parallel findings in their analysis of OBBB’s Child Tax Credit. Its analysis finds that roughly 19 million will be ineligible for the full credit in 2025 because their family income is not high enough to qualify.

The Columbia researchers document that OBBB moved the income goalposts upward: a two-parent, two-child family now needs at least $41,500 in income to access the full Child Tax Credit, up from $36,000 under prior law, leaving roughly two million newly ineligible children in moderate-income families.

A separate Columbia CPSP brief analyzing a potential $5,000 Child Tax Credit, as Rep. Blake Moore (R-UT) has proposed, makes the design stakes even clearer. Moore’s bill raises the credit but leaves in place the earnings-based phase-in so even more families are left behind.

In contrast, a universal (fully refundable) $5,000 credit that eliminates the phase-in would deliver average gains of up to $4,000 per child near the poverty line and $4,800 per child in deep poverty.

The Tax Policy Center (TPC) confirmed the same pattern: the OBBB’s structure increases benefits for wealthier families while continuing to exclude the lowest-income households entirely.

Why the Credit Fails the Poorest Children: The Refundability Trap

The fundamental structural problem with the CTC isn’t complicated, but it is deliberately obscured. The credit is divided into a non-refundable portion and a refundable portion. Families who owe little or no federal income tax – because they earn too little to owe it – cannot benefit from the non-refundable piece. The refundable portion is then subject to a phase-in formula: families can only receive the lesser of 15% of their earnings above $2,500 up to an arbitrarily-imposed cap of $1,700 per child as a tax refund.

OBBB did not touch that structure. It simply raised the non-refundable ceiling while leaving the floor unchanged.

As Columbia’s researchers note starkly: “the families currently ineligible for the full credit would see no gain in their credit under H.R. 1.”

Raising the maximum credit to $2,500 or $2,200 means nothing if your family’s income never reaches the threshold to unlock it.

The impacts are not evenly distributed. Columbia found that disproportionately excluded from the full credit under OBBB are:

• 48% of American Indian or Alaska Native children

• 45% of Black children

• 39% of Latino children

• 60% of children with a female single parent

• 35% of children in rural areas

These disparities are a direct consequence of structural inequality, and OBBB chooses to exacerbate them rather than to improve the footing, life-chances, and opportunity for all children.

Younger Children Are Especially Shortchanged

One of the most troubling findings in the ITEP analysis is the relationship between child age and credit eligibility.

Among households where the youngest child is under six, 38% of children do not receive the full CTC compared to 27% in households with older children.

This is because younger children often mean younger parents who are earlier in their careers and earning less. Some parents, particularly mothers, temporarily reduce their work hours or exit the workforce during the earliest years of a child’s life.

As ITEP bluntly observes:

…the current CTC is ill-targeted toward helping children during the most critical years of development.

Child development researchers have long identified ages 0-5 as the most important years for long-term outcomes.

We are, in effect, running our tax credit policy backward – providing the least support precisely when the investment would yield the greatest return.

There Were Better Paths, but Congress and the Trump Administration Chose Not to Take It

ITEP modeled three alternatives against OBBB’s CTC provision, and both outperform what was enacted for low- and middle-income families:

The American Family Act (DeLauro/Brown/Bennet) would eliminate all refundability restrictions for low-income families, substantially increase the maximum credit, and index it for inflation. Under this proposal, no child would be left out of the full credit simply because their family earns too little. Nearly three-quarters of the benefit would flow to families in the bottom 80 percent by income. This is the gold standard.

The bipartisan Wyden/Smith Tax Relief for American Families and Workers Act of 2024 passed the House with broad bipartisan support before stalling in the Senate. It would have relaxed (though not eliminated) the restrictions on the refundable portion of the credit. Under this approach, families in the poorest fifth would have received an average benefit of $880—still not enough, but dramatically more than the $0 OBBB delivered. That year, the House passed this bipartisan bill by an overwhelming margin but it was blocked by Senate Republicans while JD Vance was a member.

The Tax Policy Center modeled five additional options for expanding the CTC, all of which continued to require some earnings while delivering substantially more to the lowest-income families than the OBBB approach. Every one of these alternatives outperformed what Congress actually did for low-income children.

A Work Requirement for Newborns? OBBB Leaves It in the CTC but Recognizes That Is Ludicrous Elsewhere

The phrase “work requirement” has become shorthand for a certain kind of budget politics: the idea that government benefits should only flow to those who demonstrate sufficient labor market attachment.

But this logic collapses quickly when applied to children, who cannot work, and especially to infants and toddlers, whose parents face the most intensive caregiving demands of any life stage.

Here is the striking contradiction: the “One Big Beautiful Bill” itself imposes work requirements in SNAP and TANF, but it does not require work of parents of newborns and infants in those programs. SNAP exempts parents of children under age 13 from work requirements. In this case, Congress recognized that requiring work-first from parents of babies is neither practical nor humane.

Yet in that same bill, the Child Tax Credit’s earnings-based, phase-in effectively functions as a work and earnings requirement on the parents of babies and children. If your family doesn’t earn enough above $2,500 to generate sufficient credits at 15 cents on the dollar, you get only partial or no credit, regardless of your child’s age or circumstances.

Many mothers lose income during pregnancy, childbirth, and through the postpartum period for a myriad of reasons, including health care issues, lack of child care, and the lack of paid leave. The household costs of having a baby also increase dramatically.

What States Are Doing and What the Federal Government Is Not

The policy solution is straightforward: make the Child Tax Credit fully refundable for children or, at the very least, up to a certain age to remove the earnings floor for families with babies and young children.

Of the 15 states that have adopted a Child Tax Credit, 13 have made it refundable and 11 are fully refundable (California, Colorado, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, and Vermont).

States are also provided an enhanced or targeted benefit for younger children. According to ITEP:

A notable trend this year was the use of CTCs to particularly boost the incomes of families with young children. In addition to the expanded credits for young children seen in Maine, New York, Utah, and Vermont, similar legislation in other states gained momentum but did not ultimately result in policy change. Senate lawmakers in Indiana unanimously approved a refundable $500 credit for newborns. Lawmakers in Minnesota considered a $100 bump to their state CTC for the first year of a child’s life.

States get it. Washington keeps insisting on a work test for children, while states are proving you can design this like you actually want kids to thrive.

Unfortunately, except for 2021 when the Child Tax Credit was expanded and made fully refundable under the American Rescue Plan Act (ARPA) and cut child poverty to a record low 5.2%, the federal government continues to fall behind and has allowed child poverty to rise to 13.4% in 2024.

If we are serious about treating children as rights-bearing individuals with their own claims on our shared commitment to opportunity – rather than as extensions of their parents’ economic productivity – then the credit must reach all of them, regardless of what their parents earn.

The proof of concept is already out there: programs like RxKids – the rapidly expanding initiative in Michigan led by Flint pediatrician Dr. Mona Hanna that delivers unconditional cash support to families with newborns, with no income or work requirements, is now operating in 30 communities including Detroit. That program demonstrates that governments willing to meet children and families where they are can make an enormous difference in the lives of babies and children.

Who Gets Left Behind: The Human Cost of the Child Tax Credit’s Earnings Test

We got a vivid glimpse of a better alternative than the current Child Tax Credit in 2021, when the American Rescue Plan Act (ARPA) temporarily made the credit fully refundable and cut child poverty to a record low of 5.2%. For that single year, the harmful exclusions that normally create “baby and child penalties” were lifted. Children were no longer punished simply because their families faced hardship, such as:

• Having a mother who loses income during pregnancy, childbirth, and the postpartum period often means that the baby and their siblings no longer qualify for the full credit.

• Victims of a natural disaster with an accompanying loss of household income.

• Experiencing the death of a parent – even as Social Security survivor benefits may partially replace lost income, the earnings drop can still cut or eliminate the child[ren]’s eligibility for the CTC.

• Suffering as a victim of violence or abuse and a related loss of household income due to separation, divorce, incarceration, disability, etc.

• Having a parent serve as a caregiver for a child, a partner, or another family member, including elder care.

• Living with a parent who loses a job or income, even on a temporary basis.

Each of these are circumstances beyond the control of children or even most of their parents. The current Child Tax Credit structure penalizes them anyway. The 2021 expansion proved that a different design is possible and would better serve children. Congress simply chose not to keep it.

On the specific issue of natural disasters: the bipartisan Wyden/Smith bill proposed allowing families to use prior-year income to calculate their Child Tax Credit if they suffered a loss of income in the tax year – a provision Congress has enacted six previous times on a bipartisan basis. The separate Working Families Disaster Tax Relief Act (S. 3432/H.R. 6645), introduced by Sens. Amy Klobuchar (D-MN) and Bill Cassidy (R-LA) and Rep. Sara Jacobs (D-CA), would add this protection permanently.

These are not politically ambitious asks. They represent basic fairness and decency. They are the kinds of policies that virtually any member of Congress, regardless of party, could defend to their constituents. They should be uncontroversial additions that can and should be adopted now.

The Path Forward

The research from ITEP, Columbia, and the Tax Policy Center leaves no reasonable doubt about what happened: Congress and the Trump Administration chose to limit what little benefit (again, not even covering inflation since 2017) to children and families who were already doing relatively well while shortchanging children and families who need it the most.

That is not a sustainable or defensible policy. It is also not irreversible. There are clear, evidence-backed paths forward:

• First and foremost, enact the American Family Act to make the credit fully refundable with no earnings floor

In the interim, Congress should consider:

• Revisit the Wyden/Smith framework that already passed the House by a wide bipartisan margin, including its per-child phase-in fix for larger families and its Child Tax Credit income lookback for families who suffer income drops.

• Make the CTC fully refundable for children under age six, or extend that protection to age 13 – modeled on what RxKids and 11 fully refundable state CTCs already demonstrate is both workable and child poverty-reducing.

• Pass the Working Families Disaster Tax Relief Act to protect children and families who are victims of natural disasters from losing their Child Tax Credit on top of everything else they have already lost.

• Eliminate the arbitrary $1,700 credit cap that leaves low-income families short of the full credit.

Other countries have adopted a Child Poverty Target – recognizing that child poverty has negative consequences on just about every aspect of the lives of children and that there are enormous societal costs to child poverty. In its landmark report, A Roadmap to Reducing Child Poverty, the National Academies of Sciences, Engineering, and Medicine (NASEM) estimates that child poverty costs the U.S. up to $1.1 trillion annually.

Brookings president Cecilia Rouse adds that supporting children is as essential to long-term productivity as roads or bridges – that it is not generosity, it is growth policy.

None of these arguments are new. But the research backing them has never been more robust or more convergent. The question is no longer whether making the Child Tax Credit work for the poorest children is the right policy. The question is whether Congress has the will to do it, especially when the policy fix is obvious, the evidence is overwhelming, and the cost of delay is measured in childhood.

What You Can Do

We are in the battle to improve the Child Tax Credit and cut child poverty in this country, but we need your help:

• Consider upgrading to a paid subscription. Every dollar we have helps us with this ongoing battle in Congress and in the states.

• Call your member of Congress and senators to demand a better Child Tax Credit. We must do better for our nation’s children rather than to leave 19-20 million of the children who most need the credit with the least.

SOURCES

ITEP: The Child Tax Credit Leaves Out Millions of Children in 2026. There Are Better Alternatives. (March 10, 2026) https://itep.org/child-tax-credit-2026-obbba-trump-taxes/

Tax Policy Center: Congress Could Expand The Child Tax Credit For Low- And Middle-Income Families (October 8, 2025) https://taxpolicycenter.org/taxvox/congress-could-expand-child-tax-credit-low-and-middle-income-families

Columbia University CPSP: Children Left Behind by the H.R.1 “One Big Beautiful Bill Act” Child Tax Credit (August 6, 2025) https://povertycenter.columbia.edu/sites/povertycenter.columbia.edu/files/content/Publications/Children-Left-Behind-OBBBA-Child-Tax-Credit-CPSP-2025.pdf

Columbia University CPSP: Why the Design of a Larger Child Tax Credit Matters for Inequality Among Children (December 12, 2025) https://povertycenter.columbia.edu/sites/povertycenter.columbia.edu/files/content/Publications/Larger-Child-Tax-Credit-Design-Matters-CPSP-2025.pdf

Columbia University CPSP: Assessing the Potential Impacts of Refundable State Child Tax Credit Designs on Child Poverty (April 21, 2025) https://povertycenter.columbia.edu/sites/povertycenter.columbia.edu/files/content/Publications/Refundable-State-Child-Tax-Credit-Designs-Child-Poverty-CPSP-2025.pdf

Urban Institute / Tax Policy Center: Tax Credits for Children: Bridging Evidence to Policy—and Policy to Outcomes https://taxpolicycenter.org/taxvox/tax-credits-children-bridging-evidence-policy-and-policy-outcomes

RxKids: Program information and how to apply https://rxkids.org