Latest Tax Increase Hits Middle-Class Families Hard

(FeaturedHeadlines.com) Middle-class families with children are facing a significant tax hike as they prepare to file their taxes this April. Families earning at least $42,000 annually and raising three children can expect to pay approximately $950 more in federal income taxes than they did in 2018 due to historically high inflation. This inflation has diminished the actual value of the child tax credit over recent years.

Consider this scenario: a family raising three kids on the median U.S. household income of $75,000 annually. Despite their wages barely keeping up with inflation, they must contribute nearly $1,000 more to the federal government than six years ago. What’s more troubling is that the tax hike increases by about $300 for every additional child.

The bulk of this tax increase for families has occurred since 2021, coinciding with President Biden’s term, contradicting his pledge that individuals making under $400,000 would not see tax increases.

So why is the government explicitly targeting families with children for this tax hike? Unlike most tax codes, the child tax credit does not adjust for inflation. The failure to index it to inflation, combined with historic inflation levels in recent years, has exacerbated the financial strain on working families.

In 2018, the child tax credit allowed families with three children to deduct up to $6,000 from their tax bill. However, because this credit hasn’t kept pace with inflation, it now offsets a smaller portion of their actual tax liability. As a result, families with three children are expected to pay nearly $1,000 more in taxes to the federal government, leaving them financially worse off in 2023 compared to 2018.

There is a straightforward solution to this problem: increasing the maximum child tax credit by a little over $300 per child and indexing it to inflation going forward. This adjustment would provide relief to middle-class families, yet political polarization threatens its implementation.

Currently, the United States Senate is deliberating a bipartisan bill passed by the House, which aims to modify the child tax credit starting from the 2023 tax year. However, this bill fails to address the imminent tax hike on middle-class families this year. Instead, it focuses on increasing benefit payments for lower-income families.

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