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

Abstract

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.