Summary: Presidential candidate Joe Biden recently announced a proposal to temporarily expand the Child Tax Credit (CTC). We find that this proposal would cost $110 billion if implemented solely for calendar year 2021 and would cost $1.4 trillion over ten years if extended permanently. While higher income households are more likely to have qualifying children and would see larger average tax cuts ($1160 for the 90-95th percentile), lower income groups would see the largest relative benefit, with after-tax incomes increasing by 9 percent for the bottom quintile. Refer to our analysis of the estimate for more information.

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Analysis of Estimate

Table 1. Budget Cost of CTC Expansion Scenarios

Billions of Dollars, Change from Current-Law Baseline

Scenario	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030	Total
One-Year Expansion	-85	-25	0	0	0	0	0	0	0	0	-110
Under Permanent Expansion	-85	-109	-108	-107	-106	-161	-178	-179	-179	-180	-1,391

Table 2. Distribution of Federal Tax Change, Calendar Years 2021 and 2026

Distributional Effects of CTC Expansion in 2021
Distributional Effects of Permanent Expansion in 2026

Distributional Effects of CTC Expansion in 2021
With corporate income tax burden:
Income Group	Average Tax Change	Share with a Tax Cut	Average Tax Cut For Those With a Tax Change	Percent Change in After-Tax Income	Share of Tax Change	Share of Federal Taxes Paid
Income Group	Average Tax Change	Share with a Tax Cut	Average Tax Cut For Those With a Tax Change	Percent Change in After-Tax Income	Share of Tax Change	Before Tax Change	After Tax Change
Bottom quintile	-410	12%	-3,825	9%	18%	0.1%	-0.6%
Second quintile	-780	28%	-3,305	3%	26%	2.9%	2.1%
Middle quintile	-515	24%	-2,720	1%	17%	10.5%	10.3%
Fourth quintile	-620	26%	-2,815	1%	17%	18.8%	18.9%
80-90%	-1,040	37%	-3,145	1%	12%	14.7%	14.8%
90-95%	-1,160	40%	-3,285	1%	6%	10.8%	11.0%
95-99%	-735	28%	-3,240	0%	3%	16.2%	16.7%
99-99.9%	0	0%	0	0%	0%	12.7%	13.2%
Top 0.1%	0	0%	0	0%	0%	12.8%	13.3%

Distributional Effects of Permanent Expansion in 2026
With corporate income tax burden:
Income Group	Average Tax Change	Share with a Tax Cut	Average Tax Cut For Those With a Tax Change	Percent Change in After-Tax Income	Share of Tax Change	Share of Federal Taxes Paid
Income Group	Average Tax Change	Share with a Tax Cut	Average Tax Cut For Those With a Tax Change	Percent Change in After-Tax Income	Share of Tax Change	Before Tax Change	After Tax Change
Bottom quintile	-400	11%	-3,805	8%	11%	0.1%	-0.4%
Second quintile	-965	28%	-3,735	3%	21%	3.3%	2.5%
Middle quintile	-895	25%	-3,770	2%	19%	11.0%	10.6%
Fourth quintile	-1,140	27%	-4,285	1%	20%	19.0%	18.9%
80-90%	-2,225	41%	-5,475	2%	16%	14.7%	14.6%
90-95%	-2,395	44%	-5,505	1%	8%	10.9%	11.0%
95-99%	-1,405	27%	-5,215	0%	4%	16.6%	17.2%
99-99.9%	0	0	-8,445	0%	0%	12.3%	12.9%
Top 0.1%	0	0	0	0%	0%	11.7%	12.3%

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