On November 30th, 2022, the U.S. Congress Joint Economic Committee (JEC)—led by Chairman Don Beyer (D-VA)—released a new report that highlights how the expanded Child Tax Credit (CTC) drove the largest-ever decline in child poverty in a single year in 2021. Child poverty fell to 5.2%, the lowest rate on record according to Census Bureau measures, and data show the CTC expansion was the single-largest contributor to the reduction.
Over 36 million families with more than 61 million children received monthly payments in 2021, and research has shown that families spent the monthly CTC payments primarily on food, internet and other utilities, mortgage and rent payments, clothing and education costs, among other household needs. Almost immediately, the expanded CTC reduced financial hardship and food insufficiency.
Among the report’s key findings:
- The CTC lifted 5.3 million people—including 2.9 million children—out of poverty in 2021, and just the expansion of the CTC alone lifted 2.1 million children out of poverty. The CTC also helped reduce the percentage of children living in near-poverty by one-third.
- Making the credit fully refundable was the main driver of the expanded CTC’s child poverty reduction and helped 19 million more children—including 45% of Black children and 39% of Hispanic children—become eligible for the full credit.
- The expanded CTC drove significant declines in child poverty across racial and ethnic groups, particularly among Black and Hispanic households. Child poverty rates fell by more than half among Black children and more than 40% among Hispanic children from 2020 to 2021.
- The tax credit also created significant benefits for local economies: According to a previous JEC analysis, every $1 in CTC payments generated $1.25 in local economic activity.
Additionally, the report cites data showing that despite full refundability, there was no work disincentive from the expansion; families continued to be employed or seek employment, countering an oft-heard criticism of the policy.
With the release of the report, JEC Chairman Beyer released the following statement:
“The expansion of the Child Tax Credit, included in the American Rescue Plan, remains one of the largest-ever single-year tax cuts for families with children and drove the largest-ever decline in child poverty. These were investments in the health and well-being of our nation’s children—who represent our collective future—and promoted financial security in households across the country.
“The historic expansion of the CTC wasn’t just good for families—it was good for our entire economy. Paving the way for economic growth and shared prosperity is at the heart of our duties as Members of Congress, and these kinds of investments in children are essential. They have been proven time again to more than pay for themselves through improved educational attainment, better health outcomes and higher future earnings, and they are the kinds of smart investments that will pay dividends for decades to come.”