How Would a Permanent 2021 Child Tax Credit Expansion Affect Poverty and Employment?

Abstract

There is strong disagreement over how a permanent version of the 2021 Child Tax Credit (CTC) would affect families. I explore how different approaches affect the predicted impact on parental employment and poverty. My preferred approach predicts that 367,000 parents would stop working, and child poverty and deep poverty would decrease by 28 percent and 49 percent, representing 3.1 million and 1.5 million children, respectively. Larger elasticities also show a large child-poverty decrease; most parents who stop working do not fall into poverty because of other income sources. This CTC policy would reduce poverty more than the 2020 CTC and Earned Income Tax Credit combined.

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