Trump’s New Child Tax Credit Deems Millions ‘Too Poor’ to Qualify

The recent tax-and-spending package’s revamped child tax credit may look generous, but with 19 million children left behind—including some now worse off with the new CTC—state credit policies will remain the real front line against child poverty.

Columbia University’s Center on Poverty and Social Policy estimates that 28% of children nationwide will be ineligible for the full federal credit because their families don’t earn enough in income. In other words, millions of children will be too poor to qualify for a tax credit ostensibly designed to fight childhood poverty.

On paper, the tax package’s expansion of the CTC looks like a step in the right direction. The maximum credit rises from $2,000 to $2,200, and the entire thing is indexed to inflation. But if you scratch below the surface, you’ll find that Congress has left in place policy elements that blunt its impact, including a limit on the refundability of the credit.

The income phase-in still forces families to earn more to qualify for more. In practical effect, this means a two-parent family with two children must earn at least $41,500 before they qualify for the full credit. Families below that line—those most in the need of help—get a partial credit at best. This is especially notable given that the federal poverty level for a similar family of four is just $32,150.

The children left behind by the new tax law, and those previously left behind when the expanded CTC expired after tax year 2021, aren’t abstract statistics. Columbia’s numbers give us additional demographic details, finding that the exclusions will fall hardest on Black, Latino, and American Indian children, as well as those in single-parent households and rural areas.

This isn’t a red state or blue state problem, as Columbia’s breakdown shows roughly equal numbers of children in Democratic and Republican districts will lose out. Poverty doesn’t care which party holds a congressional seat, but lawmakers across the political spectrum can still claim victory for “expanding” the CTC. Yet a generous tax benefit that fewer people qualify for in its entirety looks decidedly less generous in practice.

This stands in contrast to states’ efforts to do the unglamorous work of actually chipping away at child poverty. Following the expiration of the expanded credit in 2021, a dozen states began rolling out and now offer refundable child tax credits. And the results are in: Even modest benefits make a measurable difference in people’s lives.

Minnesota provides an illustrative example, where a $1,750 per-child credit is projected to move 13,000 children out of poverty—good for almost half the impact the expanded federal credit program had prior to expiration in that state.

Colorado’s program has almost matched the federal reach in raw number of children, owing to an extra break for families in years where the state has a revenue surplus. Vermont had a similarly successful state-level credit rollout, good for almost 40% of the expanded CTC impact.

The policy prescription seems simple: Small changes can add up. State credit programs may not be able to match the scale of Washington’s, but they can be targeted, refundable, and responsive to local needs.

Columbia’s analysis shows what state-level CTC advocates hoped for all along: that state initiatives can help buffer families against the economic whiplash of federal abandonment. If the federal CTC has become a political applause line, the state versions have quietly become vital lifelines.

Columbia’s analysis puts in clear numerical terms just how many millions of children Washington has left behind, which should send a warning to state governments. If governors—along with legislatures and the voting public—assume the federal government has taken care of the program under the Trump tax law, state progress will stall and eventually evaporate. On the other hand, states shouldn’t take Columbia’s report to mean that the problem is entirely intractable.

Tax policy rarely offers moral clarity or contends with absolutes, but it does here. States have the tools to reduce child poverty, as evidenced by the successes in Minnesota, Colorado, and Vermont. The only question left is whether state legislators will take up the cause and use the policy tools at hand—or whether they’re all going to wait around for Congress to cook up another “big, beautiful” fix.

Andrew Leahey is an assistant professor of law at Drexel Kline School of Law, where he teaches classes on tax, technology, and regulation. Follow him on Mastodon at @andrew@esq.social

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