The Child Tax Credit is at a Historic Inflection Point

Let’s design it to reduce child poverty equitably
Published: 01.12.2022 Updated: 11.22.2022

In July, 3 million kids were lifted from poverty by the expanded Child Tax Credit, which is estimated to slash child poverty by 40% in a typical year. Despite that success, the expanded Child Tax Credit expired at the end of 2021. Now, our leaders have a historic opportunity to continue to reduce child poverty. To do so, and to do so equitably, it is essential that the expanded Child Tax Credit be made permanent, that eligibility for children without Social Security numbers is restored, and that the credit continues to be offered without work requirements. These policy changes will help reduce child poverty further and decrease inequities in child poverty by income, race/ethnicity and nativity.

Make the 2021 expansions permanent

The expanded Child Tax Credit, as designed in the American Rescue Plan Act, lowered poverty levels among American families through a number of policy changes: increasing the maximum credit, making the credit fully refundable, eliminating the minimum earnings requirement and raising the maximum age to 17 years old. Making these provisions permanent would help ensure that we do not lose the significant gains our country has made in lowering child poverty. 

Prior to these changes, striking inequities existed in eligibility by income and by race/ethnicity. For instance, before 2021, if a taxpayer’s credit was larger than what they owed, up to $1,400 of the $2,000 credit was paid as a tax refund. But to receive this refund, the family needed to earn at least $2,500—so children in families with very little or no earnings were either ineligible or only received a partial credit. Families in the lowest income quintile received on average $1,600 less in total credits (refundable and nonrefundable) than middle-income families.

This exclusion had serious equity implications, as Black and Hispanic families are more likely to have lower earnings and live in deep poverty. A recent study found that prior to the 2021 expansions, only half of Black and Hispanic children were eligible for the full Child Tax Credit, compared to about three-quarters of White and Asian children. Now that the expanded Child Tax Credit has expired, these inequities are back. For 2022 taxes, lower-income families—who are disproportionately Black and Hispanic—will receive much smaller payments than higher income families.

Restore eligibility for children without Social Security numbers

Unfortunately, over one million children did not benefit from even the expanded Child Tax Credit. The Tax Cuts and Jobs Act of 2018 required children to have a Social Security number to qualify for the credit, even though before that year, all children—whether they had a Social Security number or an Individual Tax Identification Number for tax purposes—were eligible. This Social Security number requirement has meant that many parents have thousands of dollars less in resources to invest in their children—both noncitizen children and their U.S. citizen or other lawfully present siblings.

Restoring eligibility to all noncitizens is an equity issue. While requiring children to have a Social Security number appears race-neutral on its face, it disproportionately harms Hispanic children in immigrant families, who are less likely to have a Social Security number or a sibling without a Social Security number. Under the expanded Child Tax Credit, this requirement actually worsened inequities between immigrant and non-immigrant families because the payments for children with Social Security numbers increased, while the payments for those without remained zero.

Work requirements are ineffective—keep them out  

Recently, some policymakers have suggested adding work requirements to the Child Tax Credit by requiring families to demonstrate they earn enough to pay taxes. As summarized in the National Academies 2019 landmark report A Roadmap to Reducing Child Poverty, “[t]here is insufficient evidence to identify mandatory work policies that would reliably reduce child poverty, and it appears that work requirements are at least as likely to increase as to decrease poverty.” Work requirements also have equity implications, as they would exclude the poorest children—those in families with no or very little income—who are also more likely to be Black and Hispanic.

The expanded Child Tax Credit was designed to be nearly universal—because every child is worth investing in. Studies of the past six months have showed that low-income families used the expanded Child Tax Credit for expenses necessary for children’s healthy development like food, rent, utilities and school supplies. Adding work requirements and taking monthly payments away from these families would mean families have less to invest in their children’s wellbeing.

Design the Child Tax Credit to reduce child poverty equitably

The American Rescue Plan Act made substantial—but temporary—changes to the Child Tax Credit. These changes drastically reduced child poverty in 2021, but to ensure lasting and more equitable effects, further and permanent changes are needed.

It is essential to make the expanded Child Tax Credit permanent, to restore eligibility for children without Social Security numbers and to maintain the credit without work requirements. These policy actions would improve access to the Child Tax Credit for very low-income children, black and Hispanic children and children in immigrant families, lowering child poverty equitably in America.

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Abigail N. Walters
Research Associate
Headshot of Dolores Acevedo-Garcia
Dolores Acevedo-Garcia
Director, Professor of Human Development and Social Policy
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Pamela Joshi
Policy Research Director
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Leah Shafer
Senior Communications Specialist