Expanding Child Tax Credits Provides More Effective Inflation Relief Than A Higher Standard Deduction

Representatives Nicole Malliotakis (R-NY) and Michelle Steel (R-CA) have introduced the Working Families Tax Cut Act to increase the standard deduction – which would increase the fixed amount of income exempt from taxes. This might not seem like something that would pass as standalone legislation, but it could be attached to a larger bill. At that point, details might change, but the effect would likely be similar.

The bill’s proponents are seeking to offset the costs of inflation for middle-income workers. While that is a laudable goal, new analysis from the Tax Policy Center suggests that the largest tax savings from increasing the standard deduction would go to those with the highest incomes, leaving middle-income workers with just a quarter of the total benefit and low-income families with even less.