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Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

August 2023

State-level effects of the expanded Child Tax Credit

Summary written by: Justin Holt

In 2021, the Supplemental Poverty Measure (SPM) for children in the United States was 5.2 percent, which was the lowest rate on record. Also, the SPM poverty rates for children from all racial and ethnic groups fell in 2021, and the greatest declines were for Black and Hispanic children. Research shows that this record-low SPM rate was correlated with the expansion of the Child Tax Credit (CTC) in 2021. In that year, the CTC was fully refundable to families who had no taxable income and families with little taxable income.

The reductions just noted are aggregate results for the United States as a whole. Brandley L. Hardy, Sophie M. Collyer, and Christopher T. Wimer seek to document state-level reductions of the 2021 SPM in their paper “The antipoverty effects of the expanded Child Tax Credit across states: where were the historic reductions felt?” (The Hamilton Project, Brookings Institution, March 2023). The authors use two categories to analyze state-level outcomes for the SPM rate for children in 2021. First, states and the District of Colombia are categorized into four geographic groupings according to whether a region has high or low costs of living and high or low pretax/transfer poverty rates. Second, the authors categorize, at the state level, three family groups that past research has documented as not receiving the CTC because their incomes are too low to qualify: families with Black children, families headed by an unmarried mother, and families living in rural areas.

In the first categorization set, Hardy, Collyer, and Wimer find that post-CTC child poverty fell in all four geographic groupings. The greatest reduction in child poverty, 51 percent, was in low-cost-of-living areas with high pre-CTC poverty rates. These geographic areas are primarily in the southeast but also include Ohio and Michigan. The smallest reduction in child poverty, 40 percent, was in high-cost-of-living areas with high pre-CTC poverty rates. These areas include the high-population states of California, Texas, New York, and Florida; the fast-growing states of Nevada and Arizona; and the District of Columbia. The low-cost-of-living and low pretax/transfer poverty areas are primarily states of the upper Midwest, the prairie states, and many Rocky Mountain states; child poverty was reduced in these states by 47 percent in 2021. States that have a high-cost-of-living and low pretax/transfer poverty include those in the Pacific Northwest, the Northeast, several mid-Atlantic states, Minnesota, Colorado, and Illinois; child poverty was reduced in these states by 41 percent.

In the second categorization set, Hardy, Collyer, and Wimer document poverty outcomes for children in families who usually do not receive the CTC because their taxable incomes are too low. They find that child poverty was reduced in 2021 by 45 percent in geographic areas with a high proportion of families with Black children. In areas with a high proportion of mothers that are unmarried, post-CTC child poverty was reduced 48 percent. After the CTC was received, poverty was reduced 50 percent in areas with a high proportion of rural families.

In addition, Hardy, Collyer, and Wimer note that child poverty was largely reduced in states with populations that have a high proportion of large families. Finally, the authors found that the largest reductions in the SPM rate were also correlated with states with no state-level earned income tax credits and lower minimum wages.