The U.S. has had the highest child poverty rate among wealthy nations for the past several decades. During the recovery from the Great Recession and prior to the COVID-19 pandemic, child poverty declined from 22 percent in 2010 to 14 percent in 2019. Black and Hispanic children are more than twice as likely to be poor as white and Asian children. Many studies demonstrate that poverty in early childhood contributes to negative life outcomes in adulthood, including lower earnings, increased rates of nonmarital births, reliance on food stamps, and poorer physical health.
The American Rescue Plan (ARP), signed into law by President Biden on March 11, 2021, includes the boldest legislation aimed at reducing child poverty in more than 50 years. Estimates suggest that it will reduce child poverty by half, with larger reductions for Black and Latino children.
The Russell Sage Foundation has for decades funded social science research on the causes and consequences of poverty and inequality and published research and policy recommendations in many books and in RSF: The Russell Sage Foundation Journal of the Social Sciences. Scholars supported by RSF grants played an important role in developing the research infrastructure that informed the Rescue Plan’s expansion of the child tax credit. RSF President Sheldon Danziger emphasizes that “RSF remains committed to funding social science research that uses the best available data and rigorous research methods to further our understanding of pressing social problems such as poverty and inequality. We are delighted when RSF-supported research is valued not only by the research community and the public, but also informs important legislation, such as the American Rescue Plan.”
The ARP significantly expands the existing child tax credit and ensures that the poorest families, including parents without earned income, will benefit. The ARP provides up to $3,600 for young children and $3,000 for children ages six to seventeen; these benefits are reduced once income reaches $75,000 for single tax filers and $150,000 for joint filers. The existing $2,000 child tax credit remains available to families with an adjusted gross incomes up to $400,000 for joint filers and up to $200,000 single filers.
The new credit differs from the previous one in that it will be distributed as a monthly cash allowance beginning in July 2021, rather than just annually at tax filing. The Tax Policy Center estimates that families will receive an average $2,700 tax cut, However, it will be in effect only for 2021 unless additional legislation is passed.
The ARP’s child tax credit was informed by a 2018 RSF journal article, “A Universal Child Allowance: A Plan to Reduce Poverty and Income Instability Among Children in the United States.” Its co-authors include H. Luke Shaefer (University of Michigan), Sophie Collyer (Columbia University), Greg Duncan (University of California, Irvine), Kathryn Edin (Princeton University), Irwin Garfinkel (Columbia University), David Harris (Columbia University), Timothy M. Smeeding (University of Wisconsin-Madison), Jane Waldfogel (Columbia University), Christopher Wimer (Columbia University), and Hirokazu Yoshikawa (New York University). The ARP draws on the authors’ recommendations for “universality, accessibility, adequate payment levels, and more generous support for young children.”
The expanded child tax credit finally puts the U.S. on par with wealthy nations that have provided similar child allowances for decades, including Canada, the United Kingdom, Sweden, and Australia. Jane Waldfogel, Compton Foundation Centennial Professor at Columbia University and a co-author of the 2018 RSF article, says “The U.S. has long stood out among wealthy nations in having one of the least generous safety nets and one of the highest child poverty rates.” Waldfogel demonstrated that the United Kingdom successfully reduced child poverty rates by more than 50% in the early 2000s in her 2013 RSF book, Britain’s War on Poverty.
Child poverty disproportionately affects communities of color. The new monthly child allowance has the potential to redress these racial disparities. RSF trustee Kathryn Edin (Princeton University) and a co-author of the 2018 RSF journal article, describes the legislation as “a great example of a race-neutral policy that nevertheless leads to greater racial equity.” The article’s lead author, H. Luke Shaefer (University of Michigan), added: “Thanks to estimates by my colleagues at Columbia and co-authors on this RSF article (Wimer, Collyer), we know that the expanded, refundable child tax credit is projected to cut child poverty by 45%! It will cut poverty among Black children by more than 50% and among Native American children by more than 60%.”
Greg Duncan (University of California, Irvine), another co-author of the RSF article, chaired the committee of the National Academies of Sciences, Engineering and Medicine that produced a consensus report, A Roadmap to Reducing Child Poverty (2019). RSF was one of the funders of the NAS report. Duncan, both a Margaret Olivia Sage Scholar and former visiting scholar at RSF, is the author or co-editor of several RSF books, most recently, Whither Opportunity: Rising Inequality, Schools, and Children's Life Chances (2011).
The NAS report concludes that child poverty costs the nation between $800 billion and $1.1 trillion per year in terms of lost productivity, public safety and incarceration, health care expenditures, homelessness, and child maltreatment. It recommends a range of policy interventions to reduce child poverty. The projected cost of the ARP is 1.9 trillion dollars; the Joint Committee on Taxation estimates $110 billion for the child tax credit and $422 billion for direct payments to individuals.
Because both low-income and moderate-income families will receive the child tax credit in 2021, it is more likely that public opinion will view it favorably and not as “a handout” for the poor. As Christopher Ellis (Bucknell University) and Christopher Faricy (Syracuse University) outline in their new RSF book, Other Side of the Coin: Public Opinion toward Social Tax Expenditures (2021), social welfare policies designed as tax expenditures are widely popular with the general public and escape the stigma associated with direct welfare spending. RSF trustee Kathryn Edin states that “Given the near-universal feature of the ARP, which benefits middle class and poor children alike, the credit will give dignity, not strip it. Here, the message is: ‘You’re a parent—something society values—and we’re going to recognize your contribution with this benefit.’”
In the wake of the Rescue Plan’s passage, RSF-affiliated researchers have been widely cited. The New York Times cited RSF journal author Sophie Collyer and RSF grantees Hilary Hoynes (University of California, Berkeley) and Diane Schanzenbach (Northwestern University) in an article about the revolutionary potential of the new child tax credit. Luke Shaefer and Jane Waldfogel were cited in another New York Times piece that compared the new legislation to Britain’s anti-poverty efforts. New York Times columnist Nicholas Kristof featured Shaefer in an opinion piece on the issue. The Boston Globe called on Sophie Collyer, research director of Columbia University’s Center on Poverty and Social Policy, to explain how the program will benefit single mothers and children of color in particular. Collyer was also cited in a New York Times article about how the COVID-19 pandemic underscored the need for new strategies to reduce child poverty.
Even as we celebrate this landmark legislation, the work of leveling the playing field for all children continues, especially because the expanded child tax credit is only in effect for 2021. Waldfogel suggests research-based public policies to further reduce child poverty, including expanded family and medical leave, increased spending on child care, and affordable housing. Shaefer concludes, “Of course the dream is to work ourselves out of a job by eliminating child poverty. Yet if the child credit became permanent it would represent the single biggest step toward that goal that our nation has ever taken.”