The Effects of the 2021 Child Tax Credit on Poverty

Abstract

The 2021 expansion of the Child Tax Credit (CTC) was a noticeable increase in government support to families with children: it provided more cash, it was not tied to work requirements, and the full amount of the potential benefit was paid by families even if the credit exceeded taxes owed (whereas previously, the maximum amount it could cover was less than the full amount if it exceeded taxes and receipt required earnings). I evaluate its effects on poverty, showing that the expansion contributed to a large decline in child poverty in 2021—and a subsequent rise in 2022, when the benefit expired. I also explain why we cannot yet determine a precise causal effect: we cannot yet account for the behavioral changes among beneficiaries that the expanded CTC may have provoked, and annual census poverty measures may not yet fully account for the tax credits that individuals receive. I discuss attendant issues in theoretical and technical detail, arguing that it will take time to establish a full accounting of the program’s effects.