Congress Must Expand the Child Tax Credit, a Powerful Tool Proven to Reduce Poverty

November 1, 2022Lillie Heyman

Nearly three years ago, the COVID-19 pandemic sent the United States into public health, social, and economic crises, but government action successfully blunted the worst economic effects. In the American Rescue Plan of 2021, Congress temporarily expanded the Child Tax Credit (CTC), increasing the annual payment from $2,000 to $3,600 for children under the age of six and $2,000 to $3,000 for children over the age of six (the expansion also raised the age limit from 16 to 17). This measure significantly reduced child poverty during a time of economic fallout and uncertainty, but the expansion expired at the end of 2021. As families continue to struggle to make ends meet, with inflation on the rise, Congress must urgently make the CTC expansion permanent in year-end tax legislation.

The CTC expansion lifted 5.3 million people, including upwards of 2.9 million children, out of poverty. Combined with stimulus payments and other relief efforts, the expansion helped lower child poverty by more than 45 percent between 2020 and 2021, reaching a record low of 5.2 percent. The expanded CTC had a significant impact on families, allowing them to meet their basic needs and reducing food insecurity, without reducing their employment. This improved ability to pay for necessities is crucial, especially to weather the increasing cost of living.

In addition to the increased benefit payment, the expanded CTC was successful in reducing poverty because it was fully refundable, meaning families with low or no reported income would still receive the full credit in the form of a tax refund. This revision ensures that families with the lowest incomes receive the same amount of the CTC as families with higher incomes. Full refundability was the driving force behind the expanded CTC's anti-poverty effects, especially among Black, Latino, and Indigenous children, and is important to narrowing racial disparities in poverty rates. Without refundability, eligibility for the CTC is unequal; only half of Black children are eligible for the CTC compared to three quarters of white children, which is especially ironic given that white families are six to seven times wealthier. With a fully refundable CTC, these racial gaps would be eliminated, and almost all Black children would be eligible. Congress cannot leave these kids behind.

Unfortunately, losing the expanded CTC has devastating effects. As of July 2022, six months after the final monthly CTC payment, there was a 25 percent increase in food insufficiency in the absence of the CTC. Further, the child poverty rate increased dramatically from December 2021 to January 2022, with about 3.7 million more children living in poverty and Latino and Black children experiencing the biggest increase in poverty.

Judaism teaches that safeguarding economic security and supporting those in need are fundamental obligations of tzedek, or justice. In this time of grave economic crisis, we are commanded, "do not harden your heart and shut your hand against your kin." Rather, we must open our hand and lend whatever is sufficient (Deuteronomy 15:7-8). The great sage and Torah scholar Rashi instructs us to uplift our neighbors in times of need and "strengthen [them] as [they] begin to fall," preventing them from slipping into poverty in the first place. Inspired by our tradition, we must urge Congress to recommit to passing strong economic policy, like the expanded CTC, to enable all workers, children, and families to live with greater security and dignity.

Reducing poverty is key to better health outcomes, improved educational attainment, and higher earnings as adults. The time is NOW. In year-end legislation, Congress must urgently expand the CTC and ensure that it is fully refundable, extending eligibility to households with little or no earnings and making sure low-income kids get the lift they need.

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