Unintended Consequences: Democrat’s Child Tax Credit Will Cost Jobs

President Biden’s first signature legislative accomplishment, the American Rescue Plan Act (ARPA), is now law. Nearly $1.2 trillion in fiscal aid will pour into the economy before October, and another $700 billion will be doled out over the next four years. As one of us has written previously, $1.9 trillion is a significant underestimate of the plan’s total cost if temporary expansions of several tax credits are permanently extended. The largest of these temporary policies is the expanded child tax credit (CTC), touted by Democrats as a boon to low- and middle-income households. In addition to being costlier than the sticker price, a permanent CTC expansion, a goal expressed by many Democratic lawmakers, would have the unintended consequence of reducing employment.

How Will the American Rescue Plan Impact Your 2021 Tax Liability?

Last week, President Biden signed into law the $1.9 trillion American Rescue Plan (ARP). The plan provides economic relief to households through the tax code, making several credits fully refundable and advanceable and providing stimulus checks that already started arriving in bank accounts this past weekend. We have created a web application to help users explore how the American Rescue Plan will impact their 2021 federal tax liability.