Expanded Child Tax Credit Payments Increased Financial Security Most Significantly among Lower-Income Households

A Brookings Institute report, “The Impacts of the 2021 Expanded Child Tax Credit on Family Employment, Nutrition, and Financial Well-Being,” examines employment, financial security, and health outcomes of families before and after receiving the expanded Child Tax Credit (CTC). The researchers found 79% of CTC-eligible households received the credit, and the most common uses for the CTC included regular expenses such as housing and utilities (70%) and essential items for children (58%). Eligible households were more likely than non-eligible households to experience improved financial security, including declines in the use of risky financial products and the improved ability to pay for emergency expenses. CTC-eligible households were also less likely to experience eviction during the payment period than non-eligible households.

The report details findings from a survey conducted immediately before the first CTC payment in July 2021 and following the last monthly payment six months later. The sampled population included both CTC-eligible households with dependent children and CTC-ineligible households without children under age 18. The groups were comparable on measures of employment status, educational achievement, home ownership, and geographic region.

The survey found that 79% of CTC-eligible households received the monthly credit. The most common uses for the tax credit were for recurring expenses like housing and utilities (70%), essential items for children (58%), food (56%), emergency savings (49%), and paying off debt (42%). CTC uses varied by household income and race and ethnicity. Seventy-nine percent of households earning less than $24,999 and 75% of households earning between $25,000 and $49,999, for example, reported using the CTC on routine expenses such as housing, compared to 46% of households making over $100,000. Families of color were also more likely to make investments in their children’s long-term educational expenses using the CTC payments. Thirty-four percent of Black households and 24% of Latino households reported using the CTC to start or grow a college fund, compared to 15% of white households.

CTC recipients reported decreased financial hardship due to their regular payments. Of households that experienced difficulty affording essential items due to inflation, 70% noted that CTC payments helped them navigate higher prices. CTC-eligible households were also less likely to be evicted compared to non-eligible households. Between the first and second survey rounds, 1.9% of CTC-eligible households were evicted compared to 2.9% of non-eligible households.

CTC payments were also found to significantly improve financial security. CTC-eligible households reported a decline in dependency on loans, pawn shops, and selling blood plasma and were more likely to stop using these services during the CTC payment period compared to non-eligible households. CTC-eligible households were also able to better manage emergency expenses, with 12.4% reporting that they paid for an emergency expense using cash in lieu of taking on debt or selling something, compared to 8.2% of non-eligible households.

The report finds that many of the CTC’s impacts were most significant for lower-income households. The CTC also significantly improved the ability of Black, Latino, and other non-white households to make investments that could improve their long-term economic stability. Failing to continue the expanded CTC could jeopardize the short- and long-term positive outcomes experienced by low-income families and families of color.

Read the article at: https://brook.gs/37CrFDU