Merge pull request #2299 from PolicyEngine/PavelMakarchuk/issue2298

Family First Act blog post

src/posts/articles/family-first-act.md

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+On January 13th, Congressman Blake Moore (R-UT) [introduced](https://blakemoore.house.gov/media/press-releases/congressman-blake-moore-introduces-legislation-to-enhance-the-child-tax-credit-and-provide-tax-relief-for-parents) the [Family First Act (FFA)](https://blakemoore.house.gov/imo/media/doc/ctc_bill_text.pdf), which would reform several tax provisions starting in 2026 after the Tax Cuts and Jobs Act expires. The reform primarily expands the Child Tax Credit and extends the cap on state and local tax deductions, while also repealing dependent exemptions and head of household filing status, and reforming the Earned Income Tax Credit and Child and Dependent Care Credit. This analysis uses PolicyEngine's microsimulation model to estimate its impacts on household incomes, poverty, inequality, and federal revenue.
+
+## Defining the Reform
+
+Here we describe each provision of the Family First Act. See **Table A.1** in the Appendix for a detailed comparison of FFA, current policy (under TCJA), and current law (post-TCJA).
+
+### Child Tax Credit (CTC)
+
+The FFA expands the CTC from $1,000 to $4,200 for children up to age five and $3,000 for children ages six to 17, up to six children per filer. It phases in from $0 to $20,000 of earnings and phases out at 5% above $200,000 ($400,000 joint), retaining the TCJA thresholds of 2018–2025. Under current law in 2026, the threshold would revert to $75,000 ($110,000 joint).
+
+### Pregnant Mother’s Credit
+
+The FFA adds a pregnant mother’s credit of up to $2,800 for each newborn. It phases in until $10,000 of earnings.
+
+### Reform of the Earned Income Tax Credit (EITC)
+
+The FFA consolidates eight existing EITC household types (single/married and 0/1/2/3+ children) into four (single/married and 0/1+ children). The phase-in rate remains 7.65% for households without children and 34% for those with children. The phase-out rate becomes 10% for households without children and 25% for households with children, compared to 7.65% and up to 21.06% today.
+
+### Repeal of Head of Household Filing Status
+
+The FFA repeals head of household filing status, which increases tax thresholds for single parents under current policy.
+
+### Repeal of Dependent Exemptions
+
+The TCJA repealed dependent exemptions from 2018 to 2025. Starting in 2026, these exemptions would return at $5,300. The FFA continues their repeal, maintaining the TCJA approach.
+
+### Repeal Child Portion of the Child and Dependent Care Credit (CDCC)
+
+The FFA limits the CDCC to dependent care expenses for individuals who are 18 or older and unable to self-care due to disability. Currently, the CDCC is available for children under 13.
+
+### Cap the State and Local Tax (SALT) Deduction
+
+The $10,000 SALT deduction cap from the TCJA is scheduled to expire in 2026. The FFA would keep the $10,000 cap in place.
+
+## Household Impacts of the Family First Act
+
+Consider a single parent with two children, ages five and ten, earning $30,000 in Utah. Under the FFA, [household net income increases by $1,835](https://policyengine.org/us/household?focus=householdOutput.netIncome&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2&household=48565). The increase comes from a $5,395 expansion in the Child Tax Credit, partially offset by reductions in tax credits and increased tax liability. The federal EITC falls by $1,688, and the Utah EITC, which matches the federal credit, decreases by $338. The household pays $1,854 more in tax before credits due to the elimination of both dependent exemptions and head of household filing status.
+
+Figure 1 shows how this household's experience [varies with income](https://policyengine.org/us/household?focus=householdOutput.earnings&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2&household=48565). Net income rises until earnings reach $188,000, after which the gains diminish and eventually become losses. At $350,000 of earnings, the household faces its largest reduction in net income of $5,900.
+
+![Figure 1: FFA effect on net income for a single parent in Utah with two children ages 5 and 10](https://cdn-images-1.medium.com/max/3200/0*x8MiEDhoh0QJu5gI)
+
+Figure 2 shows how the reform [alters the household's marginal tax rates](https://policyengine.org/us/household?focus=householdOutput.mtr&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2&household=48565), particularly if they earn under $50,000, where more programs change such as the Earned Income Tax Credit and dependent exemptions.
+
+![Figure 2: FFA effect on marginal tax rates for a single parent in Utah with two children ages 5 and 10](https://cdn-images-1.medium.com/max/3200/0*karwlvhwpukVHknG)
+
+The reform's effects vary with marital status, number of children, income, and childcare expenses. Figure 3 shows how these factors affect the impact to net income, holding child ages at ages 6 to 12. These impacts differ from those in Figure 1 as they assume (a) all children are age 6 and 12 (rather than 5 and 10), and (b) the household is in Texas, which has no income tax or credits (rather than Utah).
+
+![Figure 3: FFA effect on net income by marital status, children, income, and childcare expenses](https://cdn-images-1.medium.com/max/2656/0*lKs_ij6_V1sEyJdU)
+
+Single-parent households can see net income decrease by up to $10,000, or more with childcare expenses, with the largest reductions occurring at incomes between $300,000 and $400,000. The magnitude of change increases with the number of children in the household. Married households, in contrast, experience net income increases of up to $4,000-$5,000 until their earnings exceed $400,000. As with single-parent households, those with more children see larger changes in net income due to the expanded Child Tax Credit.
+
+When households have childcare expenses, the impacts shift. A household with $10,000 in childcare expenses sees up to $3,000 less in net income due to changes in the Child and Dependent Care Credit. Married households maintain net gains until reaching about $420,000 in earnings, after which the gains gradually decline. Single households experience a steeper decline in net income as earnings grow, reflecting the reformed EITC structure.
+
+## National Impacts of the Family First Act
+
+We estimate national impacts using the PolicyEngine US microsimulation model. See Appendix B for methodological details.
+
+### Federal Revenue Effects
+
+The FFA raises [$20 billion](https://policyengine.org/us/policy?focus=policyOutput.budgetaryImpact.overall&reform=73465&region=enhanced_us&timePeriod=2026&baseline=2) in net federal revenue in 2026.
+While the Child Tax Credit expansion (including the pregnant mother's credit) costs $170 billion, other provisions raise $190 billion-—primarily the SALT deduction cap which raises $111 billion. Figure 4 shows the revenue impact of each provision.
+
+![Figure 4: Federal budgetary impacts of Family First Act provisions in 2026](https://cdn-images-1.medium.com/max/2000/1*1WWqPxqlKr2yN3ds9BZzfQ.png)
+
+Over the 2025-2034 budget window, the reform raises $494 billion, with federal revenue gains growing each year as shown in Figure 5.
+
+![Figure 5: Federal budgetary impacts of Family First Act from 2025 to 2034](https://cdn-images-1.medium.com/max/2640/0*mwlUL3jthCnKvis8)
+
+### State Revenue Effects
+
+State revenues rise by [$3.9 billion in 2026](https://policyengine.org/us/policy?focus=policyOutput.budgetaryImpact.overall&reform=73465&region=enhanced_us&timePeriod=2026&baseline=2), largely from state-level credits that match federal amounts. States such as Colorado (25%), Connecticut (40%), Louisiana (5%), and others provide income tax credits that matching the federal EITC amount by varying percentages. Additionally, states such as Arkansas (20%), Colorado (up to 50%), Delaware (50%), and others match the federal CDCC amount under state-specific Child and Dependent Care Income Tax Credits. We consider these state impacts in the following distributional analysis.
+
+### Changes in Income Distribution
+
+The reform affects household incomes across the income distribution, as shown in Figure 6. [Net income rises for 36% of people and falls for 16%](https://policyengine.org/us/policy?focus=policyOutput.winnersAndLosers.incomeDecile&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2). The ninth income decile sees the highest share of households with income gains (47%), while the top decile has the highest share with income losses (49%).
+
+![Figure 6: Distribution of gains and losses](https://cdn-images-1.medium.com/max/3200/0*f-gK9uscrzd-5170)
+
+### Poverty Reduction
+
+The reform [reduces poverty by 5.9%](https://policyengine.org/us/policy?focus=policyOutput.povertyImpact.regular.byAge&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2) overall (a 1.5 percentage point reduction in the Supplemental Poverty Measure). As shown in Figure 7, child poverty falls by 10.7%, while deep poverty—households below half the poverty line—declines by 2.1%.
+
+![Figure 7: Poverty reduction by age group](https://cdn-images-1.medium.com/max/3200/0*Xp698QhswZMUp5u6)
+
+The reform also reduces income inequality, [lowering the Gini index by 1.4%](https://policyengine.org/us/policy?focus=policyOutput.inequalityImpact&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2). The share of total income held by the top 1% of households falls by 3.1%.
+
+Finally, the reform increases the [prevalence of cliffs](https://policyengine.org/us/policy?focus=policyOutput.cliffImpact&reform=73466&region=enhanced_us&timePeriod=2026&baseline=2) by 0.07% and reduces the severity of cliffs by 0.2%.
+
+## Conclusion
+
+Congressman Blake Moore’s Family First Act modifies multiple tax policies. The bill changes the Earned Income Tax Credit, Child Tax Credit, Child and Dependent Care Credit, and SALT deduction, and it repeals head of household filing status and dependent exemptions. We project that these reforms would raise $494.4 billion in federal revenues from 2026 to 2034, with the amount increasing annually. According to our simulation, the reform raises net income for 36% of the population and reduces poverty by 5.9% (and child poverty by 10.7%).
+
+## Appendix A: Detailed Policy Comparison
+
+### Table A.1: FFA Compared to Current Policy and Current Law (2026)
+
+| Program                         | Feature               | Current Policy (2023–25)                                                                                  | Current Law (2026)                                                                                        | FFA                                                                                                           |
+| ------------------------------- | --------------------- | --------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- |
+| Child Tax Credit                | Maximum Credit Amount | $2,000 per child                                                                                          | $1,000 per child                                                                                          | $4,200 per child under 6; $3,000 per child under 18                                                           |
+| Child Tax Credit                | Phase-out Start       | $200,000 ($400,000 joint)                                                                                 | $75,000 ($110,000 joint)                                                                                  | $200,000 ($400,000 joint)                                                                                     |
+| Child Tax Credit                | Phase-out Rate        | 5%                                                                                                        | 5%                                                                                                        | 5%                                                                                                            |
+| Child Tax Credit                | Phase-in Details      | Up to $1,400 refundable, phases in at 15% of earnings above $2,500                                        | Up to $1,000 refundable, phases in at 15% of earnings above $3,000                                        | Phases in for earnings up to $20,000 at earnings/20,000 rate                                                  |
+| Child Tax Credit                | Child Cap             | None                                                                                                      | None                                                                                                      | Maximum 6 children                                                                                            |
+| Pregnant Mother's Credit        | Maximum Credit Amount | None                                                                                                      | None                                                                                                      | $2,800 per newborn child                                                                                      |
+| Pregnant Mother's Credit        | Phase-in Requirements | None                                                                                                      | None                                                                                                      | Phases in for earnings up to $10,000 at earnings/10,000 rate                                                  |
+| EITC                            | Phase-in Rate         | 7.65% (0 children); 34% (1 child); 40% (2 children); 45% (3+ children)                                    | 7.65% (0 children); 34% (1 child); 40% (2 children); 45% (3+ children)                                    | 7.65% (0 children); 34% (with children)                                                                       |
+| EITC                            | Maximum Credit Amount | $649 (0 children); $4,328 (1 child); $7,152 (2 children); $8,046 (3+ children)                            | $662 (0 children); $4,413 (1 child); $7,292 (2 children); $8,204 (3+ children)                            | Single: $700 (0 children), $4,300 (with children); Married: $1,400 (0 children), $5,000 (with children)       |
+| EITC                            | Phase-out Start       | Single: $10,620 (0 children), $23,350 (1+ children); Married: $17,730 (0 children), $30,470 (1+ children) | Single: $10,830 (0 children), $23,810 (1+ children); Married: $18,080 (0 children), $31,060 (1+ children) | Single: $10,000 (0 children), $33,000 (with children); Married: $20,000 (0 children), $43,000 (with children) |
+| EITC                            | Phase-out Rate        | 7.65% (0 children); 15.98% (1 child); 21.06% (2+ children)                                                | 7.65% (0 children); 15.98% (1 child); 21.06% (2+ children)                                                | 10% (0 children); 25% (with children)                                                                         |
+| Child and Dependent Care Credit | Eligibility           | Children under 13 and dependents/spouse physically/mentally incapable of self-care                        | Children under 13 and dependents/spouse physically/mentally incapable of self-care                        | Only dependents/spouse physically/mentally incapable of self-care who are 18+                                 |
+| Dependent Exemptions            | Amount                | $0                                                                                                        | $5,300                                                                                                    | $0                                                                                                            |
+| Head of Household Status        | Status                | Active                                                                                                    | Active                                                                                                    | Repealed                                                                                                      |
+| SALT Deduction                  | Cap                   | $10,000 per filer                                                                                         | Uncapped                                                                                                  | $10,000 per filer                                                                                             |
+
+## Appendix B: Simulation Methodology
+
+### Data and Software
+
+This analysis uses:
+
+- PolicyEngine US version 1.172.0 microsimulation model
+- Enhanced Current Population Survey microdata
+- 2026 tax parameters from current law
+- [This specialized code](https://github.com/PolicyEngine/analysis-notebooks/tree/main/us/family_first_act)
+
+### Key Assumptions
+
+The simulation:
+
+- Compares FFA to current law baseline after TCJA expiration
+- Assumes no behavioral responses to policy changes
+- Models full CTC takeup
+- Models partial EITC takeup based on [IRS Taxpayer Advocate Service estimates](https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2020/08/JRC20_Volume3.pdf#page=62)
+- Includes state tax interactions where credits match federal amounts; distributional impacts consider state impacts, while budgetary impacts break out federal from state
+- Projects parameters forward using statutory inflation adjustments and CBO inflation forecasts
+
+### Margin of Error
+
+Results are point estimates from survey microdata. Sampling error and modeling uncertainty affect precision. Key sources of uncertainty include:
+
+- CPS sampling variation
+- Income and demographic reporting error
+- Tax filing unit construction from households
+- Benefit takeup assumptions
+- Economic projection uncertainty
+- Behavioral responses

src/posts/posts.json

@@ -1045,5 +1045,14 @@
     "authors": ["max-ghenis", "nikhil-woodruff"],
     "filename": "us-year-in-review-2024.md",
     "image": "year-in-review-2024.png"
+  },
+  {
+    "title": "Analysis of the Family First Act",
+    "description": "We project that Representative Blake Moore's Child Tax Credit bill would raise revenue and reduce poverty.",
+    "date": "2025-01-17 09:00:00",
+    "tags": ["us", "policy", "featured"],
+    "authors": ["pavel-makarchuk"],
+    "filename": "family-first-act.md",
+    "image": "family-first-act.jpg"
   }
 ]