Money where there is none
Nineteen million children live in families that receive less than the full credit because their parents earn too little. Full refundability sends about 19 billion euro a year to precisely those households. This is the lowest-income group any American tax provision reaches.
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Value
The stream is money in household budgets, priced at the middle of the scale like every other euro. What it buys in these households is not a marginal comfort: shoes that fit, a bus fare to a job interview, a month's rent that does not become an eviction. That the recipients are the poorest families in the country does not raise the value here; it raises the weight the euro carries, which is counted in the Impact. Booking their poverty in both places would price the same fact two ways. What the money does to the children over their lives is a separate stream and is counted separately. The value is the middle of the scale, because the stream is a transfer of money and the budgets it lands in are priced in the Impact.
Impact
About 19 million children receive less than the full credit because the household's earnings are too low to claim it [1]. The credit is worth up to 2,200 dollars a child and the shortfall varies from a few hundred dollars to the whole amount; an average of 1,200 dollars is used, in a range from 700 to 1,800. Across 19 million children that is 22.8 billion dollars a year, or 19.7 billion euro at 1.16 dollars to the euro; 19 billion is used. Where it lands is what makes the argument. Households that owe no income tax on children's account sit in the bottom fifth of American incomes and often at the bottom of that fifth, where this site counts a euro at two and a half times its worth at median income — the highest weight the scale allows. That gives 47.5 billion euro a year. No part of it reaches households above the phase-in, because the measure changes nothing for anyone already receiving the full amount. The Impact is the largest in this debate by a wide margin, and it is large because of where the money goes rather than how much of it there is.
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| Children receiving less than the full credit [1] | 19 million children | ||
| × | Average shortfall per child Setting, range 700 to 1,800 dollars: the credit is worth up to 2,200 a child and the shortfall runs from a few hundred to the whole amount; take-up among families that do not otherwise file pulls it down [1][3] | 1,200 dollars a year | 22.8 billion dollars a year |
| ÷ | In euro | 1.16 dollars to the euro | 19 billion euro |
| × | Weight of a euro at these incomes households that owe no income tax on children's account sit in the bottom fifth of American incomes and often at the bottom of it, where this site counts a euro at 2.5 — the highest weight the scale allows | 2.5 | 47.5 billion euro |
| ÷ | Normalised Impact scale of this evaluation | 5 billion euro a point | 9.5 |
Plausibility
The mechanism is a formula: removing an earnings test pays the credit to households that fail it, and who those households are is known from tax and survey data rather than estimated [1]. The counterfactual is current law, in which the refundable portion phases in at fifteen cents per dollar of earnings above 2,500 dollars. What is estimated is the average shortfall, and the 2021 expansion supplies a check on it: that year the credit was made fully refundable and the payments that went out are on record, so the order of magnitude is observed rather than modelled [2]. Where this measure differs from 2021 is that it does not raise the credit amount, only its reach, so it costs a fraction of what that expansion did. The confounder that matters is take-up: a family that owes no tax may not file, and the 2021 experience showed that reaching the very poorest requires outreach rather than only eligibility. That is unresolved and it works against the figure, which is why the range runs down to 700 dollars. Reverse causation does not arise. The Plausibility is at the top of what a projection can carry: the rule is arithmetic, the 2021 payments are on record, and only take-up is open.
Counterfactual: current law, with the refundable portion phasing in at fifteen cents per dollar above 2,500 dollars of earnings. Design: definitional — removing an earnings test pays the credit to households that fail it; the 2021 full-refundability year supplies observed payment data as a check [2]. Confounder: take-up among families that do not otherwise file, which the 2021 experience showed requires outreach; unresolved and reflected in the 700 to 1,800 dollar band. Direction: not applicable. Ceiling: projektion-level 6.0 applies because the average shortfall is estimated; definitional carries no ceiling of its own.