Child Tax Credit: A game changer in reducing poverty and hunger

April 8, 2021
iStock photo.

By Sergio Mata-Cisneros 

Last month, President Biden signed into law the American Rescue Plan Act, a $1.9 trillion relief package. A significant part of the package is the one-year expansion of the Child Tax Credit (CTC).

The expansion of the CTC is historic because it can reduce hunger and poverty and advance racial equity significantly. For example, the basic amount of $2,000 per year is being increased to $3,600 for children up to age six and to $3,000 for children 6-17, and the increase in the maximum amount begins to phase out for incomes of $112,500 for single parents and $150,000 for married couples.

Also, for the first time, it extends the credit to 17-year-olds.

The legislation directs the Internal Revenue Service to provide the CTC monthly rather than in lump sum at tax time. This change effectively institutes a child allowance through the tax code. With families receiving a monthly child allowance, it makes more effective in preventing hunger.  

Also, it makes the credit equally available to children in families with zero income through middle-income status. Under the prior law, low-income families received less than the maximum amount. Only middle- and higher-income families received the full CTC amount.

Why is this a big deal?

Currently, nearly 11 million—or 1 in 7—children in the U.S. live in poverty. Black, Latino, Native American and other children of color are disproportionately represented among children living in poverty and facing hunger, reinforcing systemic inequalities, including racial wealth gaps.

The CTC expansion is a critical investment in our nation’s children because it has the potential to reduce poverty and advance racial equity significantly.

According to estimates from the Center on Poverty and Social Policy at Columbia University, the CTC expansion may move as many as 45 percent of children living in poverty above the poverty line and reduce racial disparities in child poverty—cutting Black child poverty by 52 percent, Latino/a child poverty by 45 percent, Native American child poverty by 62 percent, Asian American and Pacific Islander child poverty by 37 percent, and White child poverty by 39 percent.

Why an emphasis on monthly payments? 

Providing the CTC monthly is more effective because it prevents hunger by ensuring that families can put food on the table every day. According to USDA data, most SNAP households exhaust their monthly allotment within two to three weeks, and the CTC monthly payment can address these recurring shortfalls of income.

The 2017 Tax Cuts and Jobs Act required that children have Social Security Numbers (SSNs) to qualify for the CTC. Before the 2017 tax law passage, the CTC had been available to immigrant children with Individual Tax Identification Numbers (ITINs).

The changes to the CTC in the American Rescue Plan Act are historic. But they must become permanent to have lasting effect against hunger—especially making the changes available to all children, including immigrant children with ITINs.

Watch a special webinar on poverty, tax credits, and the American Rescue Plan co-hosted by Bread for the World and the Friends Committee on National Legislation with special guest U.S. Sen. Sherrod Brown.

Sergio Mata-Cisneros is a domestic policy analyst at Bread for the World.

The expansion of the CTC is historic because it can reduce hunger and poverty and advance racial equity significantly.

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