At the Health Foundation, one of our priority areas is the health and well-being of children ages zero to 5. Through targeted programs, we work with partners to support trauma-informed care, social-emotional health, as well as maternal and infant health. We’re especially focused on addressing the impact of poverty on young kids and their families—because any measure that reduces economic insecurity advances the goal of health equity.
Recently, many policymakers and advocates have been examining the impact of the Expanded Child Tax Credit, which was part of the 2021 American Rescue Plan. First enacted in 1997, the original CTC gave middle-class families a nonrefundable $400 tax credit for every child who was 16 or under.
How the American Rescue Plan Helped Children
Through the American Rescue Plan (ARP), the CTC was expanded to provide $3,600 for children ages 5 and under, and $3,000 for children ages 6 and 17. The expanded credit was fully refundable, which meant that parents and guardians could claim the credit even if they didn’t have earned income or didn’t owe any income taxes. Families could also receive half of their 2021 estimated credit in advance. Simply put, the CTC expansion provided regular, direct cash payments at a time when many families were struggling due to the long-term economic impacts of the COVID-19 pandemic.
The 2021 CTC expansion decreased child poverty across the United States by 46 percent. In fact, more than 5 million people, including 2.9 million children, were lifted above the poverty line that year. Of these children, one million were under the age of 6, and 1.9 million were between the ages of 6 and 17. Studies show that families used the credit to pay for basic necessities, such as food, utilities and telecommunications, mortgage and rent, and clothing.
Unfortunately, Congress allowed the expanded Child Tax Credit to expire at the end of 2022, rolling back many of the gains made by the American Rescue Plan. According to the U.S. Census, millions of children were thrust back into poverty.
A 2024 Tax Relief Bill and a Missed Opportunity
Congress recently had an opportunity to pass the Tax Relief for American Families and Workers Act of 2024, which included a new version of the Child Tax Credit. The legislation passed in the House of Representatives but was voted down in the Senate. Under the bill, a single mother of two making $29,900 as a certified nursing assistant in a continuing care retirement community would have received an estimated benefit of $4,000. Of this amount, $910 would have been a credit against her income taxes and $3,090 would have been a straight refund. The refund could have paid for two months’ rent.
Restoring the Expanded Child Tax Credit
Even as a federal proposal to expand the Child Tax Credit remains dormant, several states have developed their own solution. As one example, New York Governor Kathy Hochul expanded New York’s Empire State Child Credit to include children under four years old, which will help an estimated 600,000 more children every year.
While we’re glad to see the state-level programs, children and families across the United States deserve the economic stability that comes with a program like the CTC. Reinstating an expanded federal Child Tax Credit could:
- Empower families, especially those with lower household incomes
- Boost the economy by several billion dollars each month, because families will have greater purchasing power
- Support racial, economic, and gender justice
- Advance health equity, since families will have more money to spend on nutritious food and health care
The Child Tax Credit is a proven anti-poverty measure—one that has the power to bolster the economic security, health, and well-being of millions of adults and children.
