Forcing People to Work So They Can Get a Child Tax Credit Is a Terrible Idea

Last year, Anna James, a mother from Fayetteville, NC received a lifeline: monthly payments from the expanded Child Tax Credit (CTC). The program provided critical financial support as she cared for her two little boys who suffered from a rare and often fatal genetic disease. Between the hospital visits, doctor’s appointments, and care at home, Anna didn’t have time for paid work, and expanded CTC payments were all she had keeping her afloat.

But this support didn’t last. The monthly expanded CTC payments ended in December 2021 after Congress failed to renew the benefit and it reverted to its pre-2021 status: a non-refundable, one-time tax credit. Non-refundable tax credits include a de facto ​“work requirement,” as they can only be claimed by someone with earned income, meaning Anna was no longer eligible to receive support.

Despite its resounding success in greatly reducing child poverty, the expanded CTC has languished in Congress, due to uniform opposition from Republicans and Democratic Sen. Joe Manchin (WV). While negotiations continue around the policy, Manchin has insisted that any permanent expansion of the credit include an explicit work requirement. This preference has been mirrored by GOP Sen. Mitt Romney (Utah), who introduced his own proposal for a CTC expansion that also includes a work requirement.

While encouraging work sounds like a laudable goal, work requirements for social programs are one of the most ineffective and harmful design choices that can be made in setting public policy. Attaching benefits to paid work has been shown again and again to have no impact on actually increasing employment rates among eligible populations. A 2021 study by the National Bureau of Economic Research, a non-partisan organization, found that ​“eliminating work requirements would likely transfer more resources to low-income adults than other programs targeting the same population.” This finding is in line with a 2016 report from the Center on Budget and Policy Priorities, a progressive think tank, which found that work requirements don’t actually cut poverty. 

What’s more, work requirements can actually have the exact opposite effect: blocking unemployed people from accessing critical support may leave them unable to successfully secure employment, acting as a poverty trap. This seems to have been the case with families receiving the expanded CTC: caregivers receiving the monthly payments said the money helped them to start or continue running their own business. With a work requirement in place, these individuals would not have had this support — and many would likely still be out of work.

Work requirements often don’t make exceptions for families in situations where paid employment makes no sense. In the case of the expanded CTC, many of the recipients were retirement-age grandparents providing care for their grandchildren and parents with disabilities or illness, such as Anna James, who are unable to work. Manchin and Romney’s approach to expanding the CTC would block these families from receiving support, despite their dire need for financial assistance.

If elected officials really want to increase workforce participation among benefits program recipients, there are ways to do that which actually work. A great start would be to remove extreme means-testing around eligibility for programs, which often remove people if their incomes rise above poverty levels. This type of ​“welfare cliff” discourages people from taking paid work for fear that the loss of benefits will outweigh the additional money they earn.

Another change to encourage work would be to abolish harsh asset limits for benefits program eligibility, which makes enrollees lose support if their savings hit a certain level—just $2,000 in the case of Supplemental Security Income (SSI). This restriction can prevent families from making the investments they need to secure a job and improve their economic situation.

One immediate way to both encourage work and help families in need would be to make childcare far more affordable than it is today. With the average cost of childcare exceeding $1,700 per month in some areas, it’s no wonder that many parents would choose to forsake a paid job and stay at home, rather than spend all day away from their children and have the money they earn barely cover the cost of care. This could be achieved by either reducing the cost of childcare through subsidies (as was proposed in President Biden’s Build Back Better legislation) or by directly supporting parents with cash payments — as was done with the expanded CTC.

Finally, it’s important to take a step back and consider how we’re defining ​“work” for parents. The concept of a work requirement for the CTC completely ignores the fact that raising children is work. One could imagine a circumvention of the work requirement by simply having two families swap children and pay each other for childcare, turning the care work into paid employment. But as long as they’re tending to their own children, the families would be out of luck.

Designing effective public policy isn’t an easy task. There are many open questions about how to best structure benefits programs and tax credits to make the most positive impact. But the evidence is in for work requirements: they just don’t work.