Both credits are built into the income tax code and both were expanded by the stimulus bill passed in 2009. The EITC is fully refundable — if the value of the credit exceeds an individual’s total income tax burden, the remaining balance is paid back to them — and the CTC is partially refundable. This means both credits work as added boosts to the paychecks of low-income and working class families. Put it all together, and CBPP found that 9.4 million people, including 4.9 million children, were kept out of poverty by the two programs in 2011.
As the chart shows, 1.5 million of those Americans owe their eligibility for the credits to expansion that came with the stimulus — an important point, since the Republicans have made repeated attempts to roll those expansions back.
This is especially galling because both the EITC and CTC have features conservatives should applaud: first, because someone has to earn an income to qualify for them, the credits operate as an economic incentive to find work. Second, eligibility for both credits phases out gradually, minimizing any “welfare trap” effects. And third, because they’re credits rather than deductions, the money they provide is more focused on Americans in need, with less excess spending higher up the income ladder.
Beyond their poverty reducing effects, CBPP also found that families that benefitted from the credits saw their children go on to earn more as adults (when parents are stuck in low-wage work, it has damaging ripple effects for their children) and that the EITC specifically has done far more to increase employment amongst single mothers than either the GOP’s much touted welfare reform in the 1990s.