The Economic Growth and Family Fairness Tax Reform Plan, a brainchild of Senators Mike Lee (R-Ut) and Marco Rubio (R-Fl), is designed, in part, to help middle-income families raise their children. Over the past several months, policymakers have argued about the merits of the plan, and analysts have modeled its distributional effects, albeit with widely different results based on a lack of clarity about some of its provisions.
The crowning jewel of the Lee-Rubio plan is a new child tax credit of $2,500””separate from the existing $1,000 Child Tax Credit””with no phase out for higher income families. Based on our current understanding of the plan, very few if any lower-income families with children would benefit, while the annual cost of extending this tax relief to middle-class and wealthy families is $414 billion.