Joint Economic Committee Report: Expanded Child Tax Credit Drove Largest-Ever Drop in Child Poverty
CTC lifted 5.3 million people, including 2.9 million children, out of poverty in 2021
Washington, December 1, 2022
Today, 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.
As part of the American Rescue Plan, the value of the CTC was dramatically increased from $2,000 per child to up to $3,600 per child under age 6 and to $3,000 per child between age 6 and 17 in 2021, and it was made fully refundable to ensure the lowest-income families could receive the full value of the credit. To help families meet their needs in real time, half of the credit was distributed via monthly payments, and the remainder of the credit was distributed via families’ annual tax returns. Over 36 million families with more than 61 million children received monthly payments in 2021, and data showed 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 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. Other analysis found that the CTC expansion would boost consumer spending by $27 billion, generating $1.9 billion in revenues from state and local sales taxes and supporting over 500,000 full-time jobs.
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.”