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Child Tax Credit expansions were instrumental in reducing poverty rates to historic lows in 2021

Government policies enacted in the wake of the pandemic have proven critical for reducing child poverty in the United States. Census Bureau data released last week showed that government social programs kept tens of millions of people out of poverty in 2021.

Child poverty reached its lowest level on record, as calculated by the Supplemental Poverty Measure (a measure that includes both cash and noncash benefits). This new historic low is largely thanks to the expanded Child Tax Credit (CTC), a key component of the 2021 American Rescue Plan (ARP) that has since expired. Without additional action by Congress to renew the expanded Child Tax Credit, we should expect higher child poverty in future years.

Let’s start with the outstanding role the Child Tax Credit played in reducing child poverty. The Child Tax Credit is a payment to support families raising children under 17 years of age of up to $2000 per qualifying child. The 2021 ARP expanded the credit to increase the level of earnings to families receiving the credit (up to $3600 per child under age 6) and to make the credit more widely available and fully refundable.

The refundable Child Tax Credits alone account for a reduction in child poverty of 2.9 million. Within that, the expanded Child Tax Credits—a key element of the 2021 American Rescue Plan (ARP)—lifted 2.1 million children out of poverty. The ARP Child Tax Credit is the leading reason child poverty fell so precipitously from 9.7% in 2020 to 5.2% in 2021, the lowest rate on record. Nearly three-quarters of the poverty reducing impact of the Child Tax Credits came from the ARP expansions. In total, the increasing importance of the Child Tax Credit is responsible for about 70% or 3.1 percentage points of that 4.5 percentage point reduction in poverty between 2020 and 2021.

Figure A separates out the effects of the Child Tax Credit without the expansions and the expanded Child Tax Credit on children’s poverty by race and ethnicity. White non-Hispanic child poverty was lower by 820,000 in 2021 because of the Child Tax Credits, 649,000 of which came from the expansions. 716,000 fewer Black children were in poverty in 2021 because of the Child Tax Credit—over 80% of that reduction in poverty came from the ARP expansions to the Child Tax Credit, one of the key reasons why Black child poverty fell by more than half between 2020 and 2021. Hispanic child poverty also saw dramatic reductions from the expansions.

The expanded Child Tax Credit reduced child poverty enormously: Number of children lifted out of poverty by each measure, in thousands

Child Tax Credit (not including the ARP expansions) Expanded Child Tax Credit (only) Total
White non-Hispanic 171 649 0 820k”,”showlabel”:true}”>
Black 116 600 0 716k”,”showlabel”:true}”>
Asian 54 56 0 110k”,”showlabel”:true}”>
Hispanic 428 752 0 1180k”,”showlabel”:true}”>
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