Child Poverty Surges After Expanded Child Tax Credit Ends

UPDATE: As of January 22, 2024, a bill which would extend the expanded Child Tax Credit through 2025 has passed the House of Representatives and is awaiting a Senate vote.

The bill would adjust the earnings requirements to take advantage of the tax credit, making it easier for lower-income families – those earning roughly between $10,000 and $50,000 – to get the full credit.

In 2021, the United States achieved a remarkable milestone in its fight against child poverty. Child poverty plummeted by a staggering 46% in 2021, from 9.7% in 2020 to just 5.2% the following year. Temporary provisions that expanded the Child Tax Credit and made the full credit available to families with the lowest incomes helped drive child poverty to a record low.

Unfortunately, the expanded Child Tax Credit ended at the end of 2021, and since then childhood poverty has surged. In 2022, the rate more than doubled from 5.2% to 12.4%. Now, about 9 million children live in poverty in the U.S. This alarming increase, the largest since the Bureau adopted its current counting method, is largely due to inflation and the expiration of the enhanced Child Tax Credit program (CTC).

Why was the Child Tax Credit so effective at reducing child poverty?

Layla Sotelo, LMSW, a New York-based social worker says the Child Tax Credit worked so well because it was simple, and gave parents the flexibility to decide what was best for their families.

“The child tax credit expansion, as well as the stimulus payments, were a straightforward method of supporting families in need. That's why they were effective in decreasing child poverty rates," Sotelo said.

By giving parents’ choice in how the extra funds were used, it empowered them to make effective decisions to uplift their families.

Why Did Congress Not Pass the Expanded Child Tax Credit?

Despite widespread support from American families and faith communities, partisan posturing in Washington blocked a continuation of the tax credit.

Republicans argued that the Child Tax Credit could increase inflation, despite inflation having dropped by 3.67%, its lowest since 2021.