A Family-Designed Approach to Improving the Child Tax Credit

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

Abstract

The Child Tax Credit (CTC) provides substantial support to families with children, lifting many out of poverty. About 30 percent of all children live in families excluded from the maximum benefit because their earnings are too low. A disproportionate share of these families are Black or Hispanic, or include undocumented members. The CTC’s temporary 2021 expansion dramatically reduced child poverty rates, especially among Black and Hispanic children. After it expired, Congress and several states began considering CTC modifications to benefit low-income families, but none have been enacted at the federal level.

We used a mixed-methods approach to analyze how CTC design could be most impactful for families that need it the most. Our work consisted of three main phases. In phase one, we convened four family advisory boards in three states to talk about the barriers families faced when claiming the CTC and what changes in the design of the CTC would make the benefit most impactful to them. We compiled family advisory boards recommendations into various categories. In phase two, we used the Tax Policy Center’s microsimulation model to analyze the potential impact of CTC changes proposed by our family advisory boards. Finally, in phase three, we conducted data walks to co-analyze our findings with each family advisory board and assess whether their recommendations would alleviate existing inequalities between families.

Our analysis showed reduced child poverty rate disparities between Black and Hispanic families and White families resulting from proposals that concentrate benefits among the lowest-income families. Also, a novel proposal to expand the credit to older children and young adults up to age 23 would deliver CTC benefits to more people with lower incomes, but at higher expense. Our findings suggest that if any of the recommended expansions were adopted, some families would still face barriers to claiming the CTC, which policymakers would need to address.

Authors

• Luisa Godinez-Puig, Urban Institute
  Non-Presenting Co-Author

• Elaine M Maag, Urban Institute
  Presenting Author

• Theresa M Anderson, Urban Institute
  Non-Presenting Co-Author