The 2021 expansion of the Child Tax Credit (CTC) led to a historic reduction in poverty in the United States, particularly for children. Research showed that child poverty fell immediately and substantially. On an annual basis, according to the US Census Bureau, child poverty fell to its lowest level on record in 2021: 5.2 percent (Creamer et al. 2022). Moreover, the CTC benefit’s monthly delivery likely reduced volatility in income and poverty; research has shown that volatility compromises family and child well-being (Hamilton et al. 2022).

The dramatic reductions in poverty induced by the expanded CTC represent positive changes to economic well-being. There are potentially larger and longer-run benefits from an increase in economic security for families with low and moderate levels of income (Garfinkel et al. 2022). Income supports enhance children’s lifetime social and economic outcomes by allowing families to meet basic needs and by increasing families’ income stability. Specifically, transfer programs that provide cash and near-cash supports have been shown to promote stronger educational, emotional, and health outcomes (Akee et al. 2018; Hardy 2022; Hardy, Hill, and Romich 2019; Hoynes, Schanzenbach, and Almond 2016; Rothstein and Wozny 2013).

The 2021 expanded CTC extended full refundability to families with little or no taxable income. Adults with young children between 0 and 5 years old received refundable credits of $3,600 per child, while those with children between 6 and 17 years old received credits of $3,000 per child. These benefit changes allowed for more of the lowest-income families—historically, those from non-Hispanic Black, Hispanic, and American Indian and Alaska Native communities (Hardy 2022)—to benefit from the program (Center on Poverty and Social Policy at Columbia University, 2021). The Census’s Supplemental Poverty Measure (SPM) showed that children from all racial and ethnic minority groups experienced relatively large reductions in poverty rates, but that SPM poverty rates fell most dramatically for Black and Hispanic children. Black child poverty rates fell by 17 percentage points between 2009 and 2021, while SPM child poverty rates fell from 30 percent to 8 percent among Hispanic children over the same period (Creamer et al. 2022).