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1 1 (February 7, 2022)

handle is hein.crs/goveffs0001 and id is 1 raw text is: Congressional____ *Research Service Informing the Iegist tive debate since 1914___________________ Factors Affecting the Cost of Extending the Expanded Child Tax Credit February 7, 2022 As Congress has considered legislation extending the expanded child credit, questions have arisen about the potential budgetary effects of such legislation and the factors that affect its projected cost. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) provide Congress with information about the projected budgetary effects of specific legislative proposals, typically in the form of cost estimates. These estimates are required to measure the budgetary effect of a legislative proposal in relation to projections of revenue and spending levels that are assumed to occur under current law, typically referred to as the current-law baseline. Changes to refundable tax credits can affect both revenue and outlays. The portion of a refundable tax credit that reduces taxes owed (i.e., reduces positive tax liability) is scored as a decrease in revenue, while the portion of the credit that is greater than taxes owed (i.e., increases negative tax liability) is scored as an increase in outlays. A variety of factors could affect the estimated budgetary effects of legislation that extends the expanded child credit, including the details of the policy being extended, the duration of the extension, other changes to the tax code that could affect child credit payments, and economic and demographic projections. Each is briefly discussed below. The Details of the Policy Being Extended The estimated budgetary effects of a proposal depend in part on what is being extended. For example, is the legislation extending the 2021 child credit or is it extending a modified version of the 2021 credit? Some modifications-like those that expand eligibility-would increase the cost of the extension, all else being equal. Other modifications-like extending a smaller credit, limiting or eliminating full refundability, or reducing the income level at which the credit begins to phase out-would reduce the cost of an extension. Congressional Research Service https://crsreports.congress.gov IN11851 CRS INSIGHT Prepared for Members and Committees of Congress

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