Child Tax Credit Research Articles

Patterns of Advance Child Tax Credit Receipt and Spending among Children with Retired or Disabled Household Members

Patterns of Advance Child Tax Credit Receipt and Spending among Children with Retired or Disabled Household Members

Association between Child Tax Credit advance payments and food insufficiency in households experiencing economic shocks.

The COVID-19 pandemic brought increases in economic shocks due to poor health and lost employment, which reduced economic well-being, especially in households with children. The American Rescue Plan Act of 2021 expanded Child Tax Credit (CTC) payments to include eligibility for the lowest income households, boosted benefit levels, and provided monthly advance payments to households with children. Using Census Household Pulse Survey respondent data from January 2021 to July 2022, we evaluated the association between these advance CTC monthly payments and food insufficiency among households with children experiencing health- or employment-related economic shocks (defined as missed work due to COVID-19/other illness or COVID-19-related employer closure/layoff/furlough). Using a triple difference design, we found that the advance CTC was associated with greater reductions in food insufficiency among households with children experiencing economic shocks both compared with households without children and with households with children not experiencing economic shocks. Permanently expanding the advance CTC could create resilience to economic shocks during disease outbreaks, climate disasters, and recessions.

“It saved us”: parent perspectives of the 2021 expanded child tax credit

“It saved us”: parent perspectives of the 2021 expanded child tax credit

Advanced child tax credit payments and national child abuse hotline contacts, 2019–2022

BackgroundChildren in households experiencing poverty are disproportionately exposed to maltreatment. Income support policies have been associated with reductions in child abuse and neglect. The advance child tax credit (CTC) payments...

Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

The Effects of the 2021 Child Tax Credit on Child Developmental Outcomes

The Effects of the 2021 Child Tax Credit on Child Developmental Outcomes

Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

The Effects of the 2021 Child Tax Credit on Parents’ Psychological Well-Being

The Effects of the 2021 Child Tax Credit on Parents’ Psychological Well-Being

The Expanded Child Tax Credit: Impacts on Food Insufficiency Across Demographic Subgroups in the United States

We investigate the association of the Child Tax Credit (CTC) program with food insufficiency and related anxieties among families with incomes below $35000. Analyzing the US Census Bureau’s Household Pulse Survey data, our xtprobit specification and estimation reveals the disparate impact of the CTC across demographic and racial divides, a departure from previous work. Subgroup analyses reveal that the final two CTC installments disproportionately benefited Hispanic households and those earning under $25000/year while producing no significant decrease in food insufficiency for black households or those earning $25000–$35000/year. The study indicates that the expanded CTC’s reduction of low-income households’ food insufficiency persisted across the program’s duration. Thus, the expansion achieved its intended purpose by helping to buffer low-income families against the fallout of the disrupted pandemic economy—an important result to keep in mind as policy makers continue to consider modifications to the CTC that improve efficacy and equity. JEL Codes: A12, A13, A14

Evaluating the Effects of the 2021 Expansion of the Child Tax Credit: The International Comparative Context

We provide an overview of child benefit programs in high-income countries, particularly in comparison to the 2019 and expanded 2021 U.S. Child Tax Credit (CTC). Most countries included in our review provide child benefits that are more generous than the 2019 (and current) U.S. CTC, aligning more closely to the parameters of the now-expired 2021 expanded CTC. We show that while the expanded U.S. CTC was in effect, the U.S. significantly improved its ranking within the Organisation for Economic Co-operation and Development (OECD) in terms of lowering child poverty rates and the effectiveness of its redistribution system on poverty alleviation. Our cross-country analysis further reveals that the refundable and monthly payment structure of the expanded 2021 CTC was in keeping with prevailing models of child benefits internationally.

Spending Responses to the Child Tax Credit Expansions

This article summarizes research literature that has studied how people used the advance Child Tax Credit (CTC) payments that were disbursed by the IRS in 2021. Four primary findings emerge. The ways in which families used the advance CTC payments varied: during the first few months the payments were being distributed, families reported paying down debt more frequently; and in the final months of the payments, families reported more frequent spending. Families primarily used the monthly CTC on household necessities and child-related spending. There was heterogeneity in the spending response across income and race. Lastly, the CTC helped families deal with rising inflation. We discuss these four findings from the extant research in detail.

The Effects of the 2021 Child Tax Credit on Parents’ Psychological Well-Being

Improving the psychological well-being of parents who received the 2021 expanded Child Tax Credit (CTC) was not an explicit focus of that benefit program, but psychological effects may have been felt, given the positive income shocks generated by the credit. This article reviews academic research that is available on the CTC’s effect on parents’ psychological well-being. Some studies have found that the CTC led to reductions in reported levels of clinical depression and anxiety among parents and in their subclinical depressive and anxiety symptoms. Other studies that have used similar methods find no effects on those outcomes. Importantly, the evidence does not point to the CTC worsening psychological well-being. Overall, evidence on this topic is thin and mixed, even when comparable studies on the impact of income support are also included in the review. We argue that building a more conclusive evidence base would require tighter alignment of policy objectives to measurement approaches.

The 2021 Child Tax Credit in U.S. Historical Context

When the Child Tax Credit (CTC) was created in 1997, its financial benefits were unavailable to families that did not earn enough to owe federal income tax. It has since evolved into a measure that provides partial benefits to millions of children in low-income working families but still leaves out children in families with extremely low or no earnings. In 2021, the credit was enlarged for one year, with full benefits provided to the poorest children. Ten states have also recently instituted state CTCs that provide full benefits to the poorest children. This history of CTC expansion contrasts with the erosion of cash assistance “spending programs”—including Temporary Assistance for Needy Families (TANF), unemployment insurance, and state general assistance—while being consistent with a larger pattern of tax-credit expansions. Both the CTC and Earned Income Tax Credit have repeatedly been expanded, and various other new benefits have been created as tax credits.

Implications of Alternative Designs of the Child Tax Credit

The Child Tax Credit (CTC) delivers more economic benefits to children than any other federal program. Under its current design, the CTC provides a benefit of up to $2,000 per child under age 17: almost 90 percent of families with children receive at least some benefits, and families with the lowest incomes receive the least. In 2021, a temporary expansion of the program increased the maximum benefit, delivered up to half the credit as a monthly payment, and allowed families with the lowest incomes to receive the full benefit: millions of families that typically received a partial benefit saw greater economic returns, and the nation saw substantial drops in poverty and hardship. Even in a highly polarized political climate, policymakers continue to consider changes to the CTC that could reclaim some of the benefits that were observed in 2021. This article describes reform options and who would benefit most from various reform approaches.

The Effects of the 2021 Child Tax Credit on Child Developmental Outcomes

Child poverty fell to historic lows in 2021, in large part due to the temporary expansion of the Child Tax Credit (CTC). We consider the possible implications of this expansion on children’s short- and long-term development. To do so, we review the available short-run evidence from the 2021 expansion and the existing research evidence on the longer-run effects of similar income transfers in childhood on child health and human capital. We conclude that the CTC likely improved child health and well-being in the short and long run, with greater impacts for poor children and modest or nonexistent effects for nonpoor children. Moreover, the effects might be more substantial for younger children and for those in places with weaker safety nets.

Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

The 2021 Child Tax Credit (CTC) expansion increased government benefits to families, and especially to families with the lowest incomes. Economic theory predicts that this policy intervention would have led to a reduction in labor supply among adults in those families. Our review of available research suggests that employment within broadly defined demographic groups was not reduced by the 2021 CTC changes. However, we see some evidence that employment was reduced among unmarried mothers with relatively low levels of education and young children—the demographic group that was most affected by the CTC expansion.

The Potential Long-Run Impact of a Permanently Expanded Child Tax Credit

Inclusion of the expanded Child Tax Credit (CTC) in the 2021 American Rescue Plan was, for many, a feasibility test of the impact of a permanent child allowance in the U.S. The CTC expansion was short-lived, however, so evaluations of its effects cannot provide complete evidence on the long-run impacts of a permanent expansion of the benefit. Here, we predict the long-term effects of a permanently expanded, refundable CTC. We use theory from standard economic models, frameworks from behavioral science and child development, and empirical evidence from literature that has evaluated previous long-term cash and quasi-cash transfers to families with children. We find that provision of the benefit would lead to increased future adult earnings and tax payments; improved child health and longevity; and reduced costs in health care, crime, and child protection. We predict that benefits to society would outweigh costs nearly 10 to 1, with most benefits due to the tax credit’s refundability.

The Effects of the 2021 Child Tax Credit on Racial and Ethnic Inequalities in Well-Being

Evidence from the temporary expansion of the Child Tax Credit (CTC) in 2021 suggests it helped to reduce family poverty, lessen food hardship, and increase families’ financial expenditures on children across race and ethnicity. We review recent evidence on the impacts of the CTC on differences in well-being across race and ethnicity, including differences in access to the tax credit, how families used the tax credit, and the food insecurity and mental health circumstances of those families. We supplement our review of extant research with an analysis of racial income inequality using nationally representative data from the Current Population Survey: we find that the 2021 CTC expansion is associated with lowered Black–white and Hispanic–white income inequality in the bottom half of the income distribution, particularly at the 10th and 25th percentiles.

The Consequences of the 2021 Child Tax Credit Expansion: An Introduction to the Volume

The American Rescue Plan Act of 2021 temporarily transformed the Child Tax Credit (CTC) into a more generous cash benefit that was more frequently distributed to families with children in the U.S. From July to December 2021, the families of more than 90 percent of U.S. children received monthly cash payments of up to $250 per child (or $300 per young child under six); and at tax time in 2022, families received lump-sum tax refunds of up to $1,500 per child (or $1,800 per young child). Many of these families had not previously had access to the full credit because their incomes were too low. The temporary expansion was not made permanent, and the CTC returned to its pre-expansion structure in 2022. This volume evaluates the effects of the 2021 CTC expansion, and this introduction provides broad context around the expansion, elaborates on the goals for the volume, and previews the volume’s subsequent contributions.

Implementing the Expanded Child Tax Credit: What Worked, What Didn’t, and How to Move Forward

The Child Tax Credit (CTC) expansion was an extraordinary experiment not just in policy design but also in policy implementation. As such, it cast light on the possibilities and blind spots of using the tax system to deliver safety-net benefits. The rapid and widespread take-up of the benefit reflected the use of a specific implementation tool that reduced administrative burden for the public: auto-enrollment via the tax system. But use of this tool also excluded families who could benefit from the program but were disconnected from the tax system. These tended to be families with the lowest incomes. Thus, while the CTC expansion offered a classic example of “targeting within universalism” by broadening a policy’s beneficiaries while making it more redistributive, its implementation revealed that a different sort of targeting is needed to reach those with the lowest incomes and to achieve the hoped-for redistributive impact.