Expansions of the Child Tax Credit were instrumental in bringing poverty rates to historic lows in 2021

Government policies enacted in the wake of the pandemic have proven crucial to reducing child poverty in the United States. Census Bureau data released last week showed that government social programs have kept tens of millions of people out of poverty in 2021.

Child poverty reached the lowest recorded level, as calculated by the Supplemental Poverty Scale (a measure that includes both monetary and non-monetary benefits). This new historic low is largely due to an increase in the Children’s Tax Credit (CTC), a key component of the 2021 American Rescue Plan (ARP) that has since expired. Without additional action by Congress to renew the expanded child tax credit, we should expect child poverty rates to rise in the coming years.

Let’s start with the significant role that the Child Tax Credit has played in reducing child poverty. The Child Tax Credit is a payment to support families raising children under 17 years of age up to $2,000 per eligible child. The 2021 ARP expanded credit to increase the income level of families receiving credit (up to $3,600 per child under 6 years old) and to make credit more widely available and fully refundable.

Refundable child tax credits alone represent a 2.9 million reduction in child poverty. Within that, expanded tax credits for children — a key component of the 2021 American Rescue Plan (ARP) — have lifted 2.1 million children out of poverty. The ARP Child Tax Credit is the main reason behind the sharp drop in child poverty from 9.7% in 2020 to 5.2% in 2021, the lowest rate on record. Nearly three-quarters of the poverty-reducing impact of the child tax credits came from ARP expansions. Altogether, the growing importance of the children’s tax credit is responsible for about 70%, or 3.1 percentage points, of this 4.5 percentage point reduction in poverty between 2020 and 2021.

Figure A It separates the effects of the Expanded Child Tax Credit and the Extended Child Tax Credit on child poverty by race and ethnicity. Poverty for non-Hispanic white children decreased by 820,000 in 2021 due to child tax credits, 649,000 of which came from expansions. The number of black children in poverty was less than 716,000 in 2021 due to the Child Tax Credit – more than 80% of this reduction in poverty came from ARP expansions to the Child Tax Credit, one of the main reasons black child poverty fell by more than half between in 2020 and 2021. Hispanic child poverty has also seen significant declines from expansions.

Expanded Child Tax Credit Cuts Significantly Child Poverty: The number of children lifted out of poverty by every scale is in the thousands

Child tax credit (not including ARP expansions) Extended Child Tax Credit (only) the total
non-spanish white 171 649 0 820k”, “showlabel”: true}”>
black 116 600 0 716k”, “showlabel”: true}”>
Asia 54 56 0 110k”, “showlabel”: true}”>
Hispanic 428 752 0 1180k”, “showlabel”: true}”>
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