A proposed expansion of the federal Child Tax Credit (CTC) would boost the family finances of around 191,000 of Arkansas children at tax time this year. The CTC provides financial relief for low- and moderate-income families with children.  

But because of how the current law is written, millions of children nationwide receive only partial funds or don’t receive any funds at all from the CTC, because their families don’t get paid enough income. The children and families who would benefit most from added income get left out under the current law. 

Right now, the Senate Finance Committee and the House Ways and Means Committee are negotiating a bipartisan tax bill that includes an expansion of the existing CTC. That expansion would have a significant impact over three years, including giving a bigger credit to the roughly 19 million children nationwide who get a partial credit or no credit because their families’ incomes are too low.  

According to a new analysis by the Center on Budget and Policy Priorities, the CTC expansion would have an immediate effect as it lifts 400,000 children above the federal poverty level and moves 3 million children closer to the poverty level in the first year. When fully in effect, 500,000 or more children would no longer live below the poverty level. This move would meaningfully reduce childhood poverty across the nation, reversing the sharp rise that occurred in 2022 following the expiration of the expanded credit that was part of the American Rescue Plan. 

In Arkansas, the analysis estimates that 191,000 children who are currently left out of the full $2,000 credit would benefit in the first year. That’s more than 1 out of every 4 children in the state. The credit would especially help children in Arkansas who are Black, Indigenous and Other People of Color (BIPOC), whose parents are more likely to hold low-paying jobs, due to historical and ongoing discrimination and barriers to prosperity. More than 4 in 10 Black and Hispanic/Latine children in Arkansas would newly benefit from the expanded credit, while more than half of children who are American Indian or Alaska Native would newly benefit from the full credit. 

The table below demonstrates how this would positively affect almost 200,000 children in Arkansas.

Arkansas Children to benefit from the proposed bipartisan CTC expansion (by race and ethnicity)

Key provisions of the proposed bipartisan plan: 

• The “Per-Child Phase-In” would provide each child in a family with their own same-sized credit, so families with multiple children could fully benefit. 
• The effective elimination of the “Refundability Cap” over time means families with earnings low enough that they incur little or no federal income tax liability would no longer see restrictions on the credit received. 
• A new “lookback” provision would allow families to use a prior year’s income if they see a sudden drop in current-year income, thereby avoiding a reduction in the credit received. 
• The CTC would be indexed, allowing families to receive larger credits in the future to cover inflationary increases in basic costs such as food and rent. 

Nearly all the benefits of the CTC improvements would go to children left out of the full credit because their families’ incomes are too low. While the proposed CTC is more modest than the now-expired child credit provisions in the American Rescue Plan, the credit would significantly reduce childhood poverty across the country and in Arkansas.  

The state-by-state numbers, and lots more information about the proposed credit, is available here from the Center on Budget and Policy Priorities.