Child Tax Credit Expansion Could Save Millions of Children Out of Poverty

A fact sheet examines the permanent expansion of the child tax credit and finds that it would reduce child poverty by more than 40 percent in a typical year.

The Issue

The child tax credit (CTC) plays a major role in reducing child poverty, and its expansion under the American Rescue Plan Act of 2021 (ARP) would save more than four million children from poverty, researchers find.

Using the supplemental poverty measure, researchers from the Urban Institute look at how a permanent expansion of the CTC would affect child poverty in every state.

Key Findings

Drawing on state-specific data before and after credit expansion:

• The ARP expanded the CTC to include 17-year-olds and increased the benefit from $2,000 to $3,600 for children under 6 and to $3,000 for children between 6 and 17.
  
• The credit is fully refundable, so all families can claim the full value. Making these changes permanent would decrease child poverty by 50 percent or more in 11 states.

Conclusion

The CTC is a critical engine that has long demonstrated its capability to positively impact people living under the Federal Poverty Line. The ARP’s expansion of resources and eligibilities shows the Biden administration’s intent to find a solution to the growing number of adults and children living in financial hardship. Through permanent expansion, policymakers in Washington can not only lift millions of children from poverty but transform CTC into one of the most effective tools addressing children in need in the United States.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.