When Congress gave more families access to the child tax credit in March 2021, the expansion lifted 2.1 million children out of poverty — a result that Americans of all political persuasions should agree is worth pursuing.
However, the program’s success did not guarantee its longevity, and the expansion was allowed to lapse at the end of 2021. The latest poverty statistics show that decision to be a huge mistake; new data show that the U.S. child poverty rate more than doubled from a record low of 5.2 percent in 2021 to 12.4 percent in 2022.
Congressional action helped provide economic security to millions of children, and congressional inaction tore that security away. In light of these latest numbers, it is clearly time to revisit expanding the child tax credit. If Congress won’t act, individual states can — and their policies can make an enormous difference, not just to families’ financial security, but to their health and overall well-being.
The data show that expanding the child tax credit can have significant downstream effects on all sorts of metrics, from education to employment to crime. The benefits are so substantial that once these effects are accounted for, each $1 in new benefits the government provides only ends up costing taxpayers 16 cents.
The expansion of the child tax credit during the height of the COVID pandemic was a watershed moment for the U.S., which spends less on families with children and has higher child poverty than other high-income countries. However, much of the discussion was focused on whether or not this newfound financial security would drive some parents out of the workforce.
Despite concerns, the few studies that examined the effects of the 2021 expansion of the child tax credit on employment are conflicting. One study suggests no major changes in employment, while another estimates 2.6 percent of working parents exiting the labor force. Moreover, a conversation that focuses only on employment misses the bigger picture.
New research shows that the positive health effects of the 2021 child tax credit expansion for American families were substantial. The latest study by one of our teams at the Harvard T.H. Chan School of Public Health found that the expansion improved anxiety symptoms among the lowest-income adults by over 13 percent and depressive symptoms by more than 9 percent.
The study adds to a body of work that found that the monthly payments reduced material hardship and food insufficiency and that food insufficiency catapulted right back up in early 2022 after the payments expired.
Improving the mental health of working parents also creates significant benefits for children, as research demonstrates that childhood trauma impacts success later in life. The landmark Vibrant and Healthy Kids report from the National Academies of Science, Engineering and Medicine makes clear that social and economic adversity is detrimental to children’s health and well-being, and that policies to improve the environments in which children grow up help to ensure that the next generation is healthy (and economically productive).
More generally, there is substantial evidence that alleviating child poverty will improve the lives of the millions of affected children — leading to meaningful social and economic benefits for the child.
Research shows that reducing child poverty improves educational attainment, as reflected in fewer school absences, higher standardized test scores and more completion of both high school and college. It also improves health during infancy, childhood and adulthood, as well as reducing mortality and crime. The financial gains from reducing childhood poverty have been found to persist long past childhood: Low-income children who benefit from safety net programs are more likely to be employed and to earn more as adults and are less likely to be poor.
The benefits of expanding the child tax credit would not only support children and families today but would yield a long-term fiscal payoff. Because reducing child poverty has a positive effect on earnings in adulthood, expanding the child tax credit would bring in more tax revenue down the road. For example, improving low-income families’ health would reduce government medical expenditures for this group.
Congress is often forced to tackle tough issues with insufficient data. This is not one of those occasions. We have mountains of evidence showing that one change can pull millions of children out of poverty, strengthening families in the short term and setting our children up for success in the long term.
Even if Congress remains paralyzed on this issue, state governments can fill the void. One of our home states, California, recently expanded its own child tax credit for low-income working families to those with no earned income. Several other states with their own child tax credits may yet do the same, advancing this policy with substantial promise to address economic and health equity.
Our elected officials have the power to transform the lives of low-income children and families; they should use it. It’s time to ensure that all children — no matter the economic circumstances of their families — have an opportunity to thrive.
Rita Hamad MD, Ph.D. is an associate professor at the Harvard T.H. Chan School of Public Health and the director of the Social Policies for Health Equity Research Center. Hilary Hoynes Ph.D. is a professor at the University of California Berkeley and the director of the Berkeley Opportunity Lab. Hoynes was also a member of the National Academies of Science, Engineering, and Medicine committee that produced the 2019 report, “A Roadmap to Reducing Child Poverty.”