The expansion of child tax credits was instrumental in bringing poverty rates down to historic lows in 2021

Government policies enacted in the wake of the pandemic have proven critical to reducing child poverty in the United States. Census Bureau data released last week showed government welfare programs lifted tens of millions out of poverty in 2021.

Child poverty reached its lowest level on record, as calculated using the Supplemental Poverty Measure (a measure that includes both cash and in-kind benefits). This new historic low is largely thanks to the Expanded Child Tax Credit (CTC), a key component of the now-defunct 2021 American Rescue Plan (ARP). Without additional action by Congress to renew the Expanded Child Tax Credit, we should be able to keep up for years to come expect higher levels of child poverty.

Let’s start with the prominent role that the Child Tax Credit has played in reducing child poverty. The Child Tax Credit is a payment to support families raising children under the age of 17, up to $2,000 per eligible child. The 2021 ARP expanded the loan to increase the income level for families receiving the loan (up to $3600 per child under age 6) and to make the loan more widely available and fully reimbursable.

Refundable child tax credits alone help reduce child poverty by $2.9 million. In this regard, the Expanded Child Tax Credits — a key element of the 2021 American Rescue Plan (ARP) — have lifted 2.1 million children out of poverty. The ARP Child Tax Credit is the main reason child poverty fell so precipitously from 9.7% in 2020 to 5.2% in 2021, the lowest rate on record. Almost three quarters of the poverty-reducing effect of the Child Tax Credits came from the ARP extensions. Overall, the increasing importance of the child allowance is responsible for about 70% or 3.1 percentage points of this 4.5 percentage point reduction in poverty between 2020 and 2021.

Figures A separates the impact of the child tax credit without the extensions and the extended child tax credit on child poverty by race and ethnicity. White non-Hispanic child poverty was 820,000 lower in 2021 because of the child tax credits, of which 649,000 came from the extensions. 716,000 fewer Black children were in child tax credit poverty in 2021 — over 80% of that poverty reduction resulted from Child Tax Credit ARP expansions, a key reason Black child poverty has since fallen by more than half 2020 and 2021. Hispanic child poverty was also dramatically reduced by the expansions.

The extended child allowance reduced child poverty enormously: Number of children lifted out of poverty by each intervention, in thousands

Child Tax Credit (without the ARP extensions) Extended child allowance (only) In total
White non-Hispanic 171 649 0 820k”,”show label”:true}”>
Black 116 600 0 716k”,”show label”:true}”>
Asian 54 56 0 110k”,”show label”:true}”>
Spanish 428 752 0 1180k”,”show label”:true}”>
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