Children’s tax credit expansions have been instrumental in bringing poverty rates to historic lows in 2021

Government policies put in place in the wake of the pandemic have been instrumental in reducing child poverty in the United States. Data from the Census Bureau released last week showed that the government’s social programs kept tens of millions of people out of poverty in 2021.

Child poverty has reached its lowest level on record, as calculated by the Supplemental Poverty Measure (a measure that includes cash and non-cash benefits). This new all-time low is largely due to the expansion of the Child Tax Credit (CTC), a key component of the 2021 American Rescue Plan (ARP) that has since expired. Without further action by Congress to renew the expanded child tax credit, we should expect greater child poverty in the years to come.

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

Reimbursable Child Tax Credits alone represent a reduction in child poverty of 2.9 million. Within that, expanded child tax credits, a key element of the 2021 American Rescue Plan (ARP), lifted 2.1 million children out of poverty. The ARP Child Tax Credit is the main reason why child poverty fell so precipitously from 9.7% in 2020 to 5.2% in 2021, the lowest rate on record. Nearly three-quarters of the poverty-reducing impact of children’s tax credits came from ARP expansions. In total, the growing importance of Child Tax Credit is responsible for about 70% or 3.1 percentage points of that 4.5 percentage point reduction in poverty between 2020 and 2021.

Figure A separates the effects of the Child Tax Credit without the expansions and widening of the Child Tax Credit on child poverty by race and ethnicity. Non-Hispanic white child poverty was 820,000 lower in 2021 due to child tax credits, 649,000 of which were from expansions. 716,000 fewer black children were in poverty in 2021 due to the Child Tax Credit – more than 80% of that poverty reduction came from ARP expansions to the Child Tax Credit, one of the main reasons black child poverty has decreased by over half between 2020 and 2021. Hispanic child poverty has also seen dramatic reductions from expansions.

The expansion of the child tax credit has greatly reduced child poverty: Number of children lifted from poverty by each measure, in thousands

Child tax credit (excluding ARP expansions) Extended Child Tax Credit (only) Total
Non-Hispanic White 171 649 0 820k “,” show label “: true}”>
Black 116 600 0 716k “,” show label “: true}”>
Asian 54 56 0 110k “,” show label “: true}”>
Hispanic 428 752 0 1180k “,” show label “: true}”>
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