The expanded child tax credit that families received in 2021 helped reduce child poverty across the country, but particularly in the South where families lack a sufficient safety net, according to a paper released on Wednesday.
The report by the Hamilton Project, the Brookings Institution’s economic policy initiative, comes as some Democrats appear ready to attempt another deal to revive the credit.
The analysis looked at the effects of the expanded child tax credit by grouping states together by factors such as their cost of living and poverty levels. Researchers found that the smallest reductions in child poverty came in states that had a high cost of living and low poverty rates even before tax liabilities and income sources such as SNAP, SSI, and unemployment insurance were considered. But even in those states, child poverty rates were reduced 40% after the expansion of the child tax credit.
The credit, which was part of the American Rescue Plan Act, not only boosted the amount of money families received (from $2,000 to $3,600 per child under age 6 and to $3,000 for all others) but also extended the age of qualifying children to 17. It also called for the credit to go to families with little or no income — people who previously did not earn enough money to qualify for a child tax credit.
It has been credited with helping to bring the country’s child poverty rate down to a record low of 5.2% last year. If Congress hadn’t approved the expanded child tax credit in 2021, another 2.1 million children would have been in poverty that year, according to the Center for Budget and Policy Priorities.
“The poverty reductions (across the U.S.) were still pretty widespread and meaningful,” said Bradley Hardy, a nonresident senior fellow in Economic Studies at the Brookings Institution and associate professor at Georgetown University, one of the authors of the paper.
Last year, Democrats tried to reach a deal to keep the expanded child tax credit by tying it to support of the extension of a business tax credit for research and development spending, but did not succeed. Now they appear to be regrouping.
CNBC reported last month that members in both the House and Senate were planning to introduce R&D tax legislation, which could give lawmakers an opportunity to push for some kind of expanded child tax credit.
Roman Rodriguez, the press secretary for Rep. Ron Estes, a Republican from Kansas, confirmed that Estes plans to introduce a bill on the R&D tax credit but did not provide a timeline.
“This R&D provision is critical for American jobs and our economy, and I am actively working with my colleagues to ensure this legislation can be introduced with bipartisan support soon,” Estes said in a statement to States Newsroom.
New Hampshire Sen. Maggie Hassan, a Democrat, is also reported to be working on a draft bill.
Researchers said that the expanded child tax credit “yielded widespread reductions in poverty across states” in 2021. Every category of states analyzed had significant falls in child poverty:
States with a high cost of living and low poverty experienced a 40% reduction in child poverty, and included Illinois, Maine, Minnesota, Oregon and Washington.
States with a high cost of living and high poverty rates saw child poverty fall 41%. Those states included California, Florida, Nevada, New York and Texas.
States with a lower cost of living and low poverty rates had a 47% drop in child poverty. Many Midwest and mountain states — Idaho, Iowa, Kansas, Montana and Wisconsin — fell into this category.
