Wednesday, September 14, 2022

Census Data Show the Pandemic Child Tax Credit Dramatically Cut Child Poverty

David Super

     A common refrain about child poverty, hunger, homelessness and other severe hardships that seem incongruous with this country’s affluence is that the problems are “complicated” and “there are no simple solutions.”  Dramatic data the Census Bureau released today shows that that is quite wrong.  Giving low-income families with children money through an expanded Child Tax Credit slashed the child poverty rate to the lowest level in the more than half a century for which data is available. 

     The big news comes in the Supplemental Poverty Measure that the Census Bureau created a few decades ago.  This differs from the Official Poverty Measure in that it includes the effects of major non-cash public benefits (such as food assistance and housing vouchers) and of the tax system (including refundable tax credits such as the Earned Income Tax Credit and the Child Tax Credit).  When the Census Bureau created the Official Poverty Measure in the early 1960s, most anti-poverty spending was in the form of direct cash payments to low-income individuals through programs such as Aid to Families with Dependent Children, Aid to the Aged, and Aid to the Blind. 

     To facilitate historical comparisons, the Census Bureau has resisted suggestions to update the Official Poverty Measure to reflect the country’s sharp shift towards non-cash aid beginning in the 1970s and anti-poverty tax policy beginning in the 1980s.  But in 2014, responding to a congressionally-commissioned National Research Council report, it began publishing the Supplemental Poverty Measure each year.  Researchers at Columbia University subsequently estimated what the Supplemental Poverty Measure thresholds would have been and how many people would have fallen beneath them back to 1967. 

     Most serious researchers interested in the effectiveness of anti-poverty policies focus on the Supplemental Poverty Measure.  Relying on the Official Poverty Measure, which excludes almost all of our largest anti-poverty programs, would be like measuring the U.S. transportation infrastructure in the 1950s and 1960s with a metric that excluded interstate highways.  Naïve reporters would say “we are spending massive amounts on transportation infrastructure and yet seeing only marginal gains.”

     For 2021, the child poverty rate was 5.2% under the Supplemental Poverty Measure.  By comparison, as recently as 2018. The child poverty rate was 13.7%.  (The pandemic sufficiently impaired data collection about what happened in 2019 that that data is less reliable.)  The child poverty rate in 2020 was 9.7%.  That reflected both the coronavirus recession and expanded unemployment compensation, food assistance, and stimulus payments in the bipartisan coronavirus relief legislation. 

     The expanded Child Tax Credit established by the American Rescue Plan Act accounted for more than half of the drop in child poverty from the previous year.  This credit monthly per-child payments to qualifying low-income families in the second half of the year.  Despite not being in effect for the whole year, it lifted 2.1 million children out of poverty for the year while reducing the depth of poverty for millions more. 

     The gains were spread across all racial and ethnic groups identified but particularly striking among non-Hispanic African-American children.  Their poverty rate was 23.7% in 2018 but just 8.3% in 2021.  Latino/a children’s poverty rate, also consistently above the national average, fell to 8.4% in 2021.  Poverty among Native American and Alaskan Native children fell to 7.4% in 2021.  White and Asian-American child poverty also declined substantially.

     A wealth of other data has already shown that the income supports in the bipartisan coronavirus relief legislation and the American Rescue Plan Act had concrete effects on how low-income families live, including less hunger and more stable housing situations. 

     These gains, however, are likely to be transitory.  When the Build Back Better reconciliation bill collapsed in Congress last fall, it took with it an extension of the expanded Child Tax Credit.  The residual CTC continues to play a substantial, positive role in reducing child poverty and in augmenting the well-being of children in families modestly above the poverty line.  Its design, however, renders ineligible many of the poorest children, greatly limiting its anti-poverty effectiveness. 

     The 2021 expansion showed what a difference a robust credit designed to reach the vast majority of low-income children can do.  Whether the country wishes to replicate the success of 2021 remains to be seen. 


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