What would the CTC be in 2024 under TRAFWA?

[MaxGhenis]

H.R.7024, the Tax Relief for American Families and Workers Act of 2024 (TRAFWA) inflation-indexes the $2,000 Child Tax Credit beginning in 2024, rounding down to the nearest $100. Different organizations thus far disagree on what the value would be in 2024: CBPP and JCT state $2,000 (with the inflation adjustment kicking in in 2025), while Tax Foundation states $2,100. JCT should be the source of truth, yet when I ran the numbers I came to the same conclusion as Tax Foundation. Here I'll dig deeper.

What does the law say?

TRAFWA Sec. 103 states:

(a) In General.—Paragraph (2) of section 24(h) is amended—

(1) by striking “AMOUNT.—Subsection” and inserting “AMOUNT.—

“(A) IN GENERAL.—Subsection”, and

(2) by adding at the end the following new subparagraph:

“(B) ADJUSTMENT FOR INFLATION.—In the case of a taxable year beginning after 2023, the $2,000 amounts in subparagraph (A) and paragraph (5)(B)(iii) shall each be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2022’ for ‘2016’ in subparagraph (A)(ii) thereof.

If any increase under this clause is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.”.

(b) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2023.

IRC 24(h)(2) describes the TCJA CTC increase from 2018-2025:

(2)Credit amount
Subsection (a) shall be applied by substituting “$2,000” for “$1,000”.

TRAFWA would thus amend IRC 24(h)(2) to:

AMOUNT.—

(A) IN GENERAL.—Subsection”, and

“(B) ADJUSTMENT FOR INFLATION.—In the case of a taxable year beginning after 2023, the $2,000 amounts in subparagraph (A) and paragraph (5)(B)(iii) shall each be increased by an amount equal to—

“(i) such dollar amount, multiplied by

“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2022’ for ‘2016’ in subparagraph (A)(ii) thereof.

If any increase under this clause is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.

Section 1(f)(3) defines the cost-of-living adjustment for tax parameters:

For purposes of this subsection—
(A)In general
The cost-of-living adjustment for any calendar year is the percentage (if any) by which—
(i)the C-CPI-U for the preceding calendar year, exceeds
(ii)the CPI for calendar year 2016, multiplied by the amount determined under subparagraph (B).
(B)Amount determined
The amount determined under this clause is the amount obtained by dividing—
(i)the C-CPI-U for calendar year 2016, by
(ii)the CPI for calendar year 2016.
(C)Special rule for adjustments with a base year after 2016
For purposes of any provision of this title which provides for the substitution of a year after 2016 for “2016” in subparagraph (A)(ii), subparagraph (A) shall be applied by substituting “the C-CPI-U for calendar year 2016” for “the CPI for calendar year 2016” and all that follows in clause (ii) thereof.

1(f)(4) and 1(f)(6)(B) indicate that the CPI-U and C-CPI-U each define calendar years as the 12-month average ending in August.

What does the law mean for the TRAFWA CTC inflation adjustment?

TRAFWA would activate 1(f)(3)(C), given it defines 2022 as a base year. That in turn, via "all that follows in clause (ii) thereof", makes 1(f)(3)(B) inapplicable. So the CTC only rises by the ratio of C-CPI-U from 2022 to 2023--specifically, the 12mo average ending August 2022 vs. August 2023--rounded down to the nearest $100.

What do the numbers imply?

CBO publishes the C-CPI-U projections that enter into its microsimulation model in its Tax Parameters and Effective Marginal Tax Rates publication, which it last updated in February 2023. That publication showed C-CPI-U of 159.8 in 2023, 168.3 in 2024, and 173.3 in 2025. 168.3 / 159.8 = 1.053, indicating that the 2024 CTC would be $2,000 * 1.053 = $2,105, rounded down to $2,100.

BLS has released actual numbers since CBO's forecast, and these actuals determined the inflation adjustments for its 2024 tax parameter update released in November. C-CPI-U is in this BLS series with the code SUUR0000SA0. This notebook queries the BLS API to get the relevant 12-mo C-CPI-U averages. They almost exactly match CBO's projections (2022 can change via revisions): 168.5 in 2023, a 5.4% increase over 159.9 in 2022.

BLS numbers therefore support Tax Foundation's conclusion that TRAFWA raises the CTC to $2,100 in 2024.

Any ideas as to how JCT arrived at $2,000 in 2024 would be appreciated.