Brand new data and reports show impact of expanded CTC: ‘This is huge for low-income families’ 


August 27, 2021

Cheerful Japanese father carrying his daughter on shoulders on beach
Last week, Voices for Human Needs discussed recent data from the U.S. Census Bureau Household Pulse survey that showed the first round of child tax credits – distributed beginning July 15 – caused a significant drop in hunger and economic hardship. 

Now the Census Bureau, as reported by the Economic Security Project, has released 
brand new data, collected after the second installment of payments was distributed in August. And the news is even better. The new figures show that hunger among families with kids has now dropped from 11 percent before the expanded CTC payments to 7.7 percent – last month, that figure was 8.4 percent. The number of adults living with children reporting that they sometimes or often didn’t have enough to eat in the past week dropped from 10.7 million before the first CTC payment to nearly 8.1 million just after the payment, and down to 7.4 million during a period that included the second payment. 

And the data show that Black and Latinx families in particular have benefited. Among Latinx adults living with children, food insecurity fell from 21 percent before the first payment to 13 percent in mid-August. Among Black adults living with children, the drop was from 20 percent before the July payments to 15 percent after the August payments. Latinx and Black families also recorded a very slight drop in the number of households reporting that they had little or no confidence in making next month’s rent payment. 

One of the most dramatic and encouraging findings: some 20 percent of Latinx families with kids and 18 percent of Black families with kids say they are newly able to meet their basic needs — stark evidence that the CTC expansion is working. 

In addition to the new data released this week, two new studies show more benefits from the CTC expansion – a significant drop in child poverty in the U.S., and a forecast of enhanced economic stimulus, particularly in rural parts of the country and in parts of the country populated by larger families. 

The first study, released by researchers at Columbia University’s Center on Poverty & Social Policy, found that the July monthly payment alone lifted households with 3 million children out of poverty. That represents a 25 percent reduction in the nation’s childhood poverty rate — from 15.8 percent to 11.9 percent. Researchers said the rate will likely fall further, depending on the success of outreach efforts to lower income parents who don’t typically file a tax return. 

“This is huge for low-income families,” Zachary Parolin, who co-authored the report, told CNBC. 

The first installment of payments reached families with more than 59 million children – about 80 percent of all kids in the U.S., the report found. It found that poverty was reduced fairly evenly, falling about 20 to 25 percent across all major and ethnic groups. However, Black and Latinx children still face twice the rate of poverty compared to White children. 

The Biden Administration issued the payment to households with 61 million children in August – about 1.6 million more children than in July. That could mean that the reduction in poverty going forward could be even larger than the Columbia University report indicates. 

second report, issued by the Niskanen Center, forecasts the broad economic impact of the CTC expansion. The report’s authors estimate that over the next 12 months, the extra benefit will boost consumer spending in the U.S. by $27 billion, generate $1.9 billion in revenues from state and local sales taxes, and support more than 500,000 full-time jobs at the median wage. 

The report found that more populous states will by nature see a larger overall benefit from the CTC expansion. But in relative terms, the expansion provides larger benefits to states with lower average incomes and larger average family sizes. In particular, rural regions will benefit from a substantial injection of relative purchasing power – equivalent, the report says, to 1.35 percent of non-metro GDP. 

“This is a benefit that doesn’t discriminate based on where you live; it’s the same amount regardless,” report co-author Sam Hammond said in an interview with Georgetown University’s Spotlight on Poverty and Opportunity. “Nonetheless, in relative terms, the Child Tax Credit represents an enormous increase in the purchasing power of families in rural areas. And I think we’ll see, over the medium term, greater economic activity and job creation in rural America as well.” 

The new Census data – coupled with these two new studies that have come out in the past week – will generate momentum as children’s advocates and others seek to either make the CTC expansion permanent as Congress spends its next weeks hammering out detailed  budget legislation. 

For his part, Hammond is optimistic about the future of the Child Tax Credit and is confident that it will be made permanent. “We see the immediate effect on parents being able to purchase food and pay for things like rent, but over the longer term, I think we’ll also see new businesses form in areas where they didn’t use to be viable because of low demand,” he said. “As more of these impacts are felt, any residual ambivalence about the Child Tax Credit will wane. That’s my prediction.” 

child poverty
Child Tax Credit