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Whitepaper: Investigating The Effects of the 2021 Child Tax Credit Expansion

By: Jacob Bastian

There has been a lot of debate over how the 2021 expansion of the Child Tax Credit (CTC) will impact poverty and maternal employment.


The goal of this paper is to:

  • (1) illustrate how the CTC has changed over time, and examine its impact on tax rates and the incentive to work;
  • (2) replicate previous research with a focus on Corinth et al. (2021) and understand how different approaches and elasticity assumptions lead to different conclusions about the CTC's effect on employment and poverty; and
  • (3) use my preferred set of elasticities to put forth my best estimate about the CTC's effect on employment and poverty.

Using the same elasticities as Corinth et al. (2021), I am largely able to replicate their employment effects, but I found much larger reductions in poverty:

  • I found a dynamic reduction in child poverty of 31.4%, larger than the 22% reduction found by Corinth et al. (2021).
  • I also found dynamic reductions in child deep poverty of 45%, much larger than the 0% found by Corinth et al. (2021).

Using my preferred approach, I find that the 2021 CTC would lead 413,000 adults, including 325,000 mothers and 96,000 poor adults, to stop working. Over a full year, the CTC would reduce adult and child poverty rates from 11.1% and 17.2%, to 7.4% and 11.2%.

Overall, the 2021 CTC reduces adult and child poverty by 33.3% and 34.9%, and reduces deep poverty by 43.5% and 51.3%, larger than the impact of the 2018 CTC and Earned Income Tax Credit combined. 

Click here to download the full Whitepaper

Unlv ctcexpansion
Company University of Nevada Las Vegas
Intended Audience CPA - small firm
CPA - medium firm
CPA - large firm
Published Date 01/14/2022

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