The study concludes “the rate spike due to the phase-out is the dominant effect, and that labor and capital supplies would be slightly greater without the credit than with it.”
If the tax rate cut is implemented, then employment would increase by 536,000 full-time equivalent position, the study concludes.
The House Ways and Means and Senate Finance committees both intend to mark up tax code overhauls this fall with the goal of simplifying the code, lowering at least some rates and fostering growth.
“Economic growth is just one of many factors to consider when evaluating the Child Tax Credit,” said report author Michael Schuyler. “Nevertheless, it should not be ignored.”
An expert from the liberal Center for Budget and Policy Priorities said the Tax Foundation study was flawed.
“This assumes that across the country there’s a group of middle class men and women who wake up one day and say, ‘Better not go to work today because I’m going to lose a nickel of the child tax credit for every dollar I earn.’ While marginal rates can be important, it seems to take a tax obsession beyond the real world," expert Chuck Marr said.