Today, the Joint Economic Committee of the United States Congress (JEC) – led by Chairman Don Beyer (D-VA) – issued a new report which highlights how the expansion of the Child Tax Credit (CTC) has led to the largest ever drop in child poverty in a single year in 2021. Child poverty has fallen to 5.2%, the lowest rate on record as measured by the Census Bureau, and the data shows that CTC expansion was the main contributor to the reduction.
As part of the US bailout, the value of the CTC has been significantly increased from $2,000 per child to $3,600 per child under 6 and $3,000 per child 6-17 in 2021 , and it was fully refundable to ensure lower-income families could receive the full value of the credit. To help families support themselves in real time, half of the credit was distributed through monthly installments, and the rest of the credit was distributed through families’ annual tax returns. Over 36 million families with over 61 million children received monthly payments in 2021, and data show that families spent 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 difficulties and food insufficiency.
Among the key findings of the report:
- CTC lifted 5.3 million people, including 2.9 million children, out of poverty in 2021, and CTC expansion alone lifted 2.1 million children out of poverty. The CTC has also contributed to reducing by a third the percentage of children living in near-poverty.
- Making the credit fully refundable has been the main driver of CTC’s broader child poverty reduction and helped 19 million more children, including 45% Black children and 39% Hispanic children, become eligible for Full Credit.
- The expanded CLC has resulted in a significant decline in child poverty across all racial and ethnic groups, particularly among Black and Hispanic households. Child poverty rates have fallen by more than half for black children and by more than 40% for Hispanic children from 2020 to 2021.
The tax credit has also created significant benefits for local economies: according to one previous JEC analysis, every dollar donated to the CTC generated $1.25 of local economic activity. Another analysis found that the CTC expansion would increase consumer spending by $27 billion, generate $1.9 billion in state and local sales tax revenue, and support more than 500,000 full-time jobs. .
With the release of the report, JEC President Beyer released the following statement:
“The expansion of the Child Tax Credit, included in the U.S. bailout, remains one of the largest single-year tax cuts ever for families with children and has resulted in the largest drop in child poverty.It was about investing in the health and well-being of our country’s children, who represent our collective future, and promoting financial security in households across the country.
“The CTC’s historic expansion has not only been good for families, it has been 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 and time again to more than pay off through better education, better health outcomes and higher future income, and these are the types of smart investments that will pay dividends. for decades to come.