News

By Lauren Slagter

ANN ARBOR – With support from the Washington Center for Equitable Growth, public policy professors at the University of Michigan’s Gerald R. Ford School of Public Policy will delve deeper into exploring the effects of the expanded Child Tax Credit on household economic well-being. 

The expanded Child Tax Credit was a pivotal part of the pandemic safety net, contributing to a historically low child poverty rate in 2021 when families received the tax credit as monthly payments. A $70,000 grant announced last month will enable Natasha Pilkauskas and Katherine Michelmore, both associate professors of public policy; with H. Luke Shaefer, the Hermann and Amalie Kohn professor of social justice and social policy; to examine how the expanded Child Tax Credit impacted low-income households’ experience of material hardship, debt, savings, and employment, with a focus on racial disparities in receipt of the tax credit. 

“Existing evidence reveals the monthly Child Tax Credit payments reduced poverty, and especially child poverty, despite the economic downturn related to the COVID-19 pandemic. Our research going forward will explore non-income outcomes related to the expanded tax credit, like the ability to afford basic necessities and get enough food to eat,” Pilkauskas said. 

The U.S. Census Bureau credited the expanded Child Tax Credit with contributing to a 46% decline in child poverty, from 9.7% in 2020 to 5.2% in 2021 – the lowest Supplemental Poverty Measure child poverty rate on record. The Supplemental Poverty Measure, which takes into account safety net programs, tax credits, and regional differences in the cost of living, is broadly considered more accurate than the government’s Official Poverty Measure.

The expanded Child Tax Credit, which was distributed as monthly payments of up to $300 per child from July to December 2021, increased the amount of the credit and made it available to the poorest families, who previously were not eligible. In 2022, the Child Tax Credit returned to its previous form, providing families with a lump sum as part of their tax refund and excluding families with no income. 

In 2021, Pilkauskas and Michelmore authored a series of policy briefs on receipt and usage of the monthly CTC payments among families with low incomes. They analyzed survey data from Propel, the creators of a Providers mobile application that helps over 5 million families manage their Supplemental Nutrition Assistance Program (SNAP) benefits. 

“The survey data revealed parents were using their CTC payments to pay for basic needs and child-related expenses. We also found disparities in which families received the tax credit, with families making less than $500 a month and Hispanic parents being substantially less likely to receive the monthly payments for which they qualified at the end of 2021,” Michelmore said.  

Shaefer has conducted ongoing analysis of material hardship levels during the pandemic. That research found a direct link between the level of hardship faced by U.S. households and the federal government’s response in the form of stimulus checks, expanded unemployment insurance, and the expanded Child Tax Credit. Shaefer is among a group of poverty scholars that have contributed significant research on the potential for an expanded Child Tax Credit that follows the design of a child allowance to reduce child poverty rates in the U.S.

“In the past two years, the United States made more progress in reducing child poverty than ever before as a result of smart, evidence-based public policies. A better understanding of the effects of the expanded Child Tax Credit can help policymakers make informed decisions about the best ways to support families struggling to afford basic necessities,” said Shaefer, who is the founding director of U-M’s Poverty Solutions, an interdisciplinary initiative that partners with communities and policymakers to find new ways to prevent and alleviate poverty through action-based research. 

A forthcoming policy brief from Pilkauskas, Michelmore, and Shaefer will provide insights into how families spent the monthly CTC payments and how the payments affected their experience of material hardship and employment decisions. 

Related reading

Op-ed in Vox: Child poverty in the US was stagnant – and then something changed 

New York Times: Pandemic aid cut US poverty to new low in 2021, Census Bureau reports

State & Hill: Changing the conversation around child poverty

Poverty Solutions research on the economic impact of COVID-19

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