Researchers Point to Tax Credits as Effective Method for Reducing Child Poverty
By Katrina Schmidt
Economic policy experts highlighted permanently expanding the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Tax Credit (CDCTC) as part of several data-based approaches for reducing child poverty at a recent event hosted by Spotlight on Poverty and Opportunity and the American Academy of Political and Social Science.
A 2019 National Academies report, “A Roadmap to Reducing Child Poverty,” provided the basis for the conversation between prominent economic and tax policy researchers. The report examined the current evidence on how poverty impacts children for their entire lives and which major assistance programs directed at children and families provide the most impact.
Johns Hopkins University Krieger-Eisenhower Professor of Economics Robert Moffitt presented an overview of the report and its conclusions.
“We had a panel of experts, and we had a specific charge: we looked at ways we could reduce child poverty by 50% within 10 years,” Moffitt said. “Our solution, and the programs we found would achieve that goal, were a combination of programs.”
The report proposed that various combinations of expanding the CTC and EITC to support families, the CDCTC to subsidize child care, SNAP, housing assistance, and creating a child allowance, could achieve the goal of cutting child poverty in half at a small cost relative to costs of poverty. Researchers estimated the proposed plan would cost $90 to $108 billion over 10 years.
Panelists also included Rucker Johnson, the chancellor’s professor of public policy at the University of California, Berkeley; Michael Strain, the director of economic policy studies at the American Enterprise Institute; and Elaine Maag, principal research associate at the Urban-Brookings Tax Policy Center. American Enterprise Institute Visiting Fellow Ramesh Ponnuru moderated the discussion.
The CTC underwent a significant temporary expansion for 2021 and will be sent to eligible families in monthly payments beginning in July. While some panelists echoed the Academies’ call for permanently expanding the CTC and other credits, Strain called for further research on whether the credit’s modified delivery schedule can effectively target support.
“The American Rescue Plan kind of converted the Child Tax Credit into a child allowance,” Strain said, but noted that social scientists have not yet been able to conduct much research on how the credit’s monthly schedule will impact families. “It may be a good thing. Many lower-income households have trouble meeting expenses month by month.”
Maag outlined the benefits of using mechanisms like tax credits to combat child poverty, emphasizing that the tax system is able to very easily reach everyone who meets eligibility criteria to file taxes and readily conduct outreach to those who do not need to file.
“The tax system has a long history of redistributing income,” Maag said. “As a result, the largest anti-poverty programs for working age families are in the tax system, so they are extremely important.”
Panelists agreed that continuing to support programs like the CTC, EITC, and CDCTC provide a relatively simple, bipartisan, and effective measure to reduce child poverty.