One Big Beautiful Bill Increased the Child Tax Credit, But a Bigger Increase is Needed

In late-breaking news about the congressional budget reconciliation package, the One Big Beautiful Bill (OBBB) Act, we learned that the final version signed into law by President Trump on July 4 included a $200 increase in the child tax credit. The welcome boost brings the credit for the biggest group of beneficiaries to $2,200 from the current level.

In what may seem like a spasm of ingratitude — as Oliver Twist pled, “Please, sir, I want some more” — advocates for much more robust recognition of the value of children expressed some disappointment at what they see as a missed opportunity. The original House bill would have raised the CTC by $500. Other proposals, including a plan from Democratic presidential candidate Kamala Harris last year, would have raised it even more, with a larger credit (up to $6,000) in a child’s first year of life.

The OBBB has other child spending features that have drawn mixed reviews. The bill expands the dependent care tax credit in several ways — first, by increasing the percentage of employer expenses for such care for which the credit can be taken (with a slightly higher percentage allowed for small businesses) and increasing the maximum amount eligible for the employer credit. The increase is large: for larger businesses, the credit amount is increased from $150,000 to $500,000, and the deductible percentage limit is 40%. For smaller businesses, the credit amount is increased to $600,000 and the deductible percentage limit is 50%.

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Second, the OBBB increases the limit for employer-sponsored flexible spending accounts (FSAs) for dependent care from $5,000 to $7,500. Pro-family groups have traditionally preferred increases in the CTC to those for dependent care (DCTC), because the CTC permits families the maximum freedom to assess their situation and determine whether to expend the credited funds on in-home or out-of-home care. In this instance, the FSA credit amount dwarfs the increase provided by the CTC.

The other provision of note is a novelty, designated the “Trump Account,” which entails a $1,000 federal deposit to a tax-deferred fund for each newborn. Parents and other third parties are permitted to donate up to $5,000 annually to the child’s account. The funds are to be invested in a low-cost stock index fund and can accumulate earnings which the child can begin tapping for qualified expenses, like education, job training, or a home purchase, when he or she turns 18. Withdrawals for unqualified purposes before age 59-1/2 are, like individual retirement accounts, subject to tax and a 10% penalty.

Various concerns exist about this new government account. In a sense, it competes with Section 529 education savings accounts, which were favored early on by pro-family groups like Family Research Council, and IRAs. More significantly, the Trump accounts represent a government expense and they are being advanced at a time of major federal deficits and debts. The CTC and the DCTC are structured, at least in their nonrefundable manifestation, as credits against tax liability for working families. Possession of a social security number is required by the OBBB to be eligible for these credits. The Trump Account effectively has no work requirement and may offer fewer investment options than other, existing accounts like IRAs. The initial deposit — $1,000 — is not a huge work disincentive, but in terms of the proverbial camel’s nose it is at least a nostril. Many analysts would prefer to see this one-time benefit transmitted through a larger CTC than the $200 boost the OBBB provided.

As framed now, when the new law expires, the CTC will revert to $2,000 per child with an annual inflation adjustment. That adjustment will be chasing inflation that has already happened in the 2025 to 2028 period, but, of course, like almost all “permanent” federal tax reforms of the last several decades, it is subject to change. The immediate aim is to make having children more affordable, and thereby to make it more attractive in this deepening era of birth dearth. The first aim is valuable whether or not the second occurs as the expense of housing, transportation, and health care remain high.

Whether or not larger changes in birth rates take place remains to be seen, but there is fresh evidence of the urgency of the issue. Projections, even in the near term, are speculative, but one source expects the 2025 birth rate to decline by .12% from 2024, after a 12.23% increase in 2024 and decreases in 2022 and 2023. The U.S. total fertility rate stood at 1.79 children per woman in 2024 — better than many nations’ but still below replacement. Projections of modest growth in total U.S. population for the next 30 years rely predominantly on immigration, which may change under current and future administration policies.

Meanwhile, the negative attitudes of the past half-century toward childbearing have produced global declines in fertility to record lows. The United Nations, long a messenger of doom exerting constant pressure for expansion of legal abortion, has released its World Fertility Report for 2024. Its findings include:

• The global fertility rate is just above two babies per woman and “is projected to continue to decline, reaching the replacement level of 2.1 in 2050 and falling to 1.8 births per woman in 2100”;
• “In over half of all countries and areas (55 per cent), with more than two thirds of the global population, the fertility level is below 2.1 births per woman. This group crosses all regions and income groups and includes some of the world’s most populous nations, such as India, China, the United States of America, Brazil and the Russian Federation”;
• In more than one in 10 countries/areas, fertility is now below 1.4 children per woman, and in four of these — communist China, the Republic of Korea, Singapore, and war-torn Ukraine — it is below 1.0 child per woman;
• “Low fertility has been accompanied by a gradual postponement of parenthood, as reflected in the widespread rise of the mean age of childbearing”;
• “In 1994, all countries and areas with fertility level below 2.1 had a mean age of childbearing below 30 years. By 2024, two thirds of them had a mean age of childbearing above 30 years, and one fifth above 32 years.”

Institutional expressions of alarm over depopulation are increasing and they hail from all parts of the political spectrum. But they are by no means controlling the debate in the West over matters as diverse as tax relief for families and funding for government family planning programs. The OBBB is the first measure signed into law by a U.S. president that ends funding for Planned Parenthood, the giant population control agency, but it does so for only a single year after the House-passed original bill did so for a decade. If Democrats return to office in 2026 or 2028, the flood of cash to Margaret Sanger’s brainchild will almost certainly resume. On top of the politics of recycled public funding (a percentage making its way back to politicians via related political action committees), there is the stark fact that today’s baby bust is admired in an amazing variety of ways.

As Will Swaim comments at National Review, Paul Ehrlich, the godfather of the “Population Bomb,” continues to clamor for fewer babies, having once suggested that the world’s ideal population is two billion people, about one-fifth of the peak it is expected to reach this century. Even more reductionist commentators have called outright for the disappearing of humanity — some as part of a general knell for mankind and others as a fondly hoped for Shangri-La. A lengthy piece last year in the prestigious Cambridge Quarterly of Healthcare Ethics by Matti Hayry, a Finnish bioethicist, announced that he would “be pleased to see no one to have children” and, as an “anti-pronatalist,” would “support stopping human reproduction and animal production.”

Then there are the ostensibly pro-natalist forces, some of whom hope to single-handedly restock the planet’s nurseries, who are using their wealth, prominence, and scientific expertise to push for genetically selected lab-grown human beings who can replenish the Earth or even pioneer the settlement of Mars. And that just touches on the fringe of the robotic revolution and the prospect of uploading human minds. Kisses will become clicks.

The long and short of it is that, despite its many positive elements, the OBBB only scratched the surface of a pro-family revival. To accomplish that, it would need a larger infusion of funds, a decided bias for child care by the family and by married one-man, one-woman families, retention of the nexus between study, work, and social benefits, and an unqualified appreciation for the value of every human life, not just, as the late Dr. Mildred Jefferson was wont to say, “the perfect, the privileged, and the planned.”

LifeNews Note: Chuck Donovan is a 50-year veteran of the national debate over the right to life and served from 1981-89 as a writer in the Reagan White House.He is the former Executive Vice President of Family Research Council.

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