400+ Economists Press Congress to Permanently Expand Child Tax Credit

A group of over 400 economists on Wednesday sent a letter to congressional leaders calling for the expanded child tax credit to be made permanent, citing "potential tremendous immediate and long-term benefits for children and their families."

The America Recovery Plan, prompted by the pandemic, expanded the child tax credit (CTC), first enacted over two decades ago. In addition to boosting the amount of the credit to up to $3,600 for parents of younger children, it advanced half of the credit ahead of tax-filing time.

The third round of payments from the CTC hit bank accounts this week, with parents of eligible children under age 6 receiving $300 per child, and those of kids aged 6 to 17 receiving $250 per child. The payments have already been shown to have a positive impact by helping families with household expenses, including being able to put enough food on the table.

That economic aid has been especially crucial because "childhood poverty is a staggering problem in the United States, affecting approximately one in seven children, and one in five children of color, even before the Covid-19 pandemic began," the economists wrote in their letter to Senate Majority Leader Chuck Schumer (D-N.Y.), Senate Minority Leader Mitch McConnell (R-Ky.), House Speaker Nancy Pelosi (D-Calif.), and House Minority Leader Kevin McCarthy.

As it stands now, eligible families--a couple making $150,000 or a single head of household making $112,500--are on track to receive just three more rounds of checks this year. But the letter's signatories, including Nobel laureate Joseph Stiglitz and inequality expert Emmanuel Saez, pointed to four broad areas to argue for making the CTC permanent, including that it would "dramatically reduce childhood poverty in the United States."

Such an expansion, the economists wrote, would also bring about "a long-term fiscal payoff," since "reducing child poverty has a positive effect on earnings in adulthood." And because families' health would improve, government medical expenditures for those receiving the aid would drop.

In fact, the letter added, "once the full effects of the CTC expansion are accounted for, the net cost to taxpayers of the expansion has been estimated to be as little as approximately 16 cents for every $1 of new benefits."

The economists also rejected the argument that making the CTC permanent would remove incentives to work, noting in part that because "the expanded CTC amount would not phase out until high levels of earnings... most families would not see their CTC amount decline if their income rises."

There's also evidence the payments are simply being used to meet basic needs, the letter said. "With the first monthly payments of the temporary CTC expansion in the United States," the letter noted, "families increased spending on food, clothes, utilities, [and] school supplies, and reduced debt, and food insecurity declined dramatically."

House Democrats, meanwhile, have proposed continuing the CTC aid through 2025. The outcome of that push, however, remains uncertain, as it would be part of the reconciliation bill, which needs support from all Democrats to pass.