State-Level Child Tax Credits Reduce Material Hardship in the Absence of a Federal Universal Child Benefit

• In Event: Tax Credits and Family Economic Well-being: New Evidence on Design, Context, and Impact

Abstract

Since the expiration of the 2021 American Rescue Plan Act (ARPA) expansion of the federal Child Tax Credit (CTC), state-level CTC adoption has grown rapidly, emerging as a critical source of support for low-income families with children. As of 2026, 13 states and the District of Columbia offer refundable CTCs. Most are fully refundable — meaning benefits reach lower-income families regardless of earned income or tax liability — in contrast to the federal CTC, which remains only partially refundable and therefore contingent on positive earnings. Yet state CTCs are far from uniform: they differ in refundability, benefit levels, phase-in and phase-out rates, income eligibility thresholds, and whether eligibility is restricted to families with young children (Vinh et al., 2025). This heterogeneity generates meaningful variation in benefit size and accessibility across states depending on families' income, number of children, and children's ages — offering a valuable empirical opportunity to examine whether additional income reduces material hardship among households with children.

Using Household Pulse Survey data from 2023–2024, we estimate the effects of state CTCs on food, expense, and housing hardship among households with children. To address the endogeneity of CTC receipt, we employ a simulated instrument (SI) that isolates policy-driven variation in CTC generosity from households' own behavioral responses. We construct the SI by applying each state's statutory rules to a fixed 2019 CPS-ASEC sample, computing eligible benefits by state and year, and collapsing to state–year–family demographic cells. Variation in the SI reflects only policy changes across states and over time — and across family size and composition — eliminating variation driven by endogenous choices about location, income, or behavioral responses. Simulated CTC benefits vary substantially across states and by the presence of children under age 6. Among households with young children, Minnesota offers the most generous average benefit ($2,241), followed by Vermont ($1,230), while Maryland provides the least ($150).

Merging the SI onto Pulse respondents observed during tax season (February through April), we estimate reduced-form regressions of household hardship on simulated CTC benefits, controlling for year, month, household demographics, and their interactions, to isolate the causal effect of CTC generosity on material hardship. Exploiting differences in legislated credit rules across states, we find that state CTC reduce families’ difficulty paying bills, housing hardship, and, most markedly, child food hardship—with benefits accruing almost entirely to renter households, who experience substantially higher rates of hardship. State-level credits that are fully available to the lowest-income families can improve children’s material conditions even in the absence of a federal expansion.

Authors

• Jiwan Lee, Brown University
  Presenting Author

• Sophie Marie Collyer, Hunter College, City University of New York
  Non-Presenting Co-Author

• Margot Jackson, Brown University
  Non-Presenting Co-Author

• Ryan Vinh, Columbia University
  Non-Presenting Co-Author

• Christopher Wimer, Columbia University
  Non-Presenting Co-Author