Expanded Child Tax Credit should be made permanent
By permanently enacting the expanded Child Tax Credit, Congress can not only drastically reduce childhood poverty and improve family and community wellbeing, but also promote our country’s long-term economic prosperity. The short- and long-term benefits of these policies will far outweigh the costs.
My research on the impact of family tax credits was recently cited in a letter signed by more than 400 economists from throughout the country.
We all agree that, simply put, the expanded Child Tax Credit should be made permanent as a matter of sound economic policy.
As we summarized in the letter, a significant body of research has demonstrated that programs like the Child Tax Credit benefit families by expanding the social and economic mobility and wellbeing of children and parents. Research has shown that such policies lead to improved educational attainment for kids, better health for kids and parents, and more economic opportunity for families.
Researchers have also concluded such benefits do not lead parents to opt out of work.
In 2019, I studied the mechanisms through which the Canadian Child Tax Benefit – a child allowance like the expanded Child Tax Credit that operates in Canada – improved child outcomes.
In our research, we found that the benefit increased household spending on things like education, food, transportation and childcare, while also reducing dollars spent on items like cigarettes and alcohol.
The evidence demonstrates that policies like the Child Tax Credit and the Canadian Child Tax Benefit improve outcomes both as a direct input into health, education and other essentials, and indirectly by reducing household financial stress and improving household wellbeing.
In the U.S., my work on the Earned Income Tax Credit – another family tax credit program like the Child Tax Credit – shows that these credits improve household finances. In particular, my research-driven recommendations published in “Economic Inquiry” just a year prior to the onset of the COVID-19 pandemic concluded that monthly, rather than lump-sum, payment of the EITC could help ease monthly budgets.
Recent data on the expanded Child Tax Credit has born out this prediction: it shows that the first monthly advance payment of the expanded Child Tax Credit during the pandemic was linked to a nearly 24 percent reduction in food insufficiency for adults in households with children. Groups like the Ohio Association of Foodbanks have reported cyclical reductions in demand for help from their hunger relief network tied to programs like the Child Tax Credit and the Pandemic EBT program.
Other research, including my own, has further borne out the reality that social safety net programs like Medicaid, nutrition assistance, and housing assistance – like the $327 billion proposed in the Build Back Better Act for rental assistance, public housing, and the national Housing Trust Fund – pay for themselves.
In fact, estimates suggest that the government recoups $5 for every $1 spent on programs targeted at kids from low-income households, like the Child Tax Credit. These cash and in-kind transfer programs improve long-term health and educational outcomes for parents and children. By providing increased financial stability to households over the long-term, these and other investments in the Build Back Better Act help kids prosper. Prosperous kids lead to a prosperous economy. By permanently enacting the expanded Child Tax Credit, Congress can not only drastically reduce childhood poverty and improve family and community wellbeing, but also promote our country’s long-term economic prosperity. The short- and long-term benefits of these policies will far outweigh the costs.
Lauren E. Jones is an Ohio State University Department of Human Sciences and John Glenn College of Public Affairs associate professor.