The Effects of the 2021 Child Tax Credit on Anxiety and Depression Among Families with Low Incomes

• In Event: Tax Credit Payments During the COVID-19 Pandemic: Implications for Family Economic Hardship and Psychological Wellbeing

Abstract

In March of 2021, Congress passed a temporary expansion of the Child Tax Credit (CTC) as part of the American Rescue Plan. The 2021 CTC expansion increased the size of the benefit, made the credit fully refundable, and extended eligibility to those with little or no earnings. Additionally, rather than distributing the entire CTC at tax time, half of the benefit was delivered in monthly installments from July 2021 to December 2021, reaching about 61 million beneficiaries (IRS 2021). These reforms made 26 million children eligible for a larger credit; 6 million of whom were entirely ineligible before the reform (Goldin and Michelmore, 2021).
Recent studies suggest that the CTC improved families’ material wellbeing (Parolin et al., 2022; Pilkauskas et al. 2022; Shafer et al. 2021), but less is known about the health-related impacts of the 2021 CTC. In this study, we focus on the effects of monthly CTC payments on the mental health of parents. Depression and anxiety are common mental health problems that play a role in parenting quality and the emotional and behavioral wellbeing of children (Goodman & Tully, 2006; Lovejoy, Graczyk, O’Hare, & Neuman, 2000). In the long-term poor mental health can have long lasting consequences on relationships with others (Coyne, 1976), and especially on children (Downey & Coyne, 1990; Elder, 1998; Radke-Yarrow & Klimes-Dougan, 2002; Turney, 2011). Understanding if the 2021 monthly CTC improved mental wellbeing among parents with low income is important in considering the potential long-term benefits of a regular cash transfer policy.
We employ a parameterized difference-in-differences design to study the effects of the 2021 monthly CTC on parent’s mental health. We use unique survey data collected in partnership with Propel, administrators of a mobile application that assists families in managing their Supplemental Nutrition Assistance Program (SNAP) benefits, and has over 5 million users – or ¼ of all SNAP beneficiaries. Thus, our study focuses on households with low incomes, families who were hit particularly hard by the COVID-19 pandemic and who have been traditionally excluded from full CTC benefits. Our analyses show that the monthly CTC benefit reduced parent’s reports of mental distress overall and of anxiety and depression although these estimates were not significant in all models. Analyses by race/ethnicity show that the effects were larger for Black parents, but differences by race/ethnicity were small. Overall, our findings suggest that the monthly CTC payments had some positive benefits on parental mental health.

Authors

• Nicole Kovski, University of Washington
  Presenting Author

• Natasha Pilkauskas, University of Michigan - Ann Arbor

• Katherine Michelmore, University of Michigan

• H. Luke Shaefer, University of Michigan