The Child Tax Credit: Tackling Child Poverty and Maternal Mental Health

By the Mom Congress Policy Team

The Taxpayer Relief Act of 1997 (P.L. 105-34) was the inception of the child tax credit (CTC), which was created to ease the financial burden to families with children. Over the years, the CTC has expanded from an upper- and middle-class benefit, to a tax benefit that lower-income families can claim. The CTC allows taxpayers to reduce their federal income liability up to $2,000 per child aged 0-16 years of age. In the event the value of the credit exceeds the amount of tax a family owes, the family may be eligible to receive a full or partial refund of the difference. This refund is capped at $1,400 per child aged 0-16 years of age. Specifically, the refund component of the CTC serves as a critical tax benefit for low-income working families.

Expanding the CTC via The American Rescue Plan

Given the immense economic hardships for families across the United States as a result of the COVID-19 pandemic, the American Rescue Plan Act of 2021 (P.L. 117-2) made critical expansions to the CTC. The credit was expanded from $2,000 per child to $3,600 per child under age 6 and $3,000 per child up to age 17 versus the previous age limit of 16 years of age. To provide much-needed economic relief, ARPA changed the CTC to be fully refundable and paid out in monthly payments for the first 6 months versus once per year. By mid-July, 88% of American families with children received monthly payments of $250 or $300 per child.

The significant expansions have made historic cuts in childhood poverty, lifting an additional 4.1 million children above the federal poverty line by an estimated 40%. Additionally, the expansion lifts an estimated 1.1 million children above half the poverty line, which supports children with the most need—Black and Latino communities.

CTC Expansion Safeguarding Maternal Mental Health

Prior to the COVID-19 pandemic, the U.S. National Health Interview Survey showed that nearly 50% of new or expectant moms could not pay their bills, which included health care bills. One in 4 women respondents stated they skipped a doctor’s visit due to the cost of care. Considering that the prevalence of depression is 40%-59% for mothers in poverty—four times higher than middle-income mothers—the U.S. must do better.

Research has started to examine the toll of COVID-19 on perinatal and postpartum mothers, and financial stress has only gotten worse. Results have shown that financial stress caused by the pandemic is associated with more than two times the likelihood of depression during pregnancy. Depression during pregnancy increases the risk for adverse birth outcomes, which in turn leads to more costs for families.

However, with comprehensive support, the health and well-being of mothers and their families can improve. The expanded CTC benefit is already having a profound impact on the lives of American families. The National Child Tax Credit Survey has shown CTC monthly payments have eased financial stress, with 70% of respondents stating the payments made them a lot less stressed about money. Further, the payments have afforded families the opportunity to alter their daily lives in positive ways. Respondents are spending the payments on toys and activities for their children, purchasing more food or higher quality food, and with lower financial stress, parents are better able to bond with their children and each other.

Next Steps

Unless Congress acts, the expansion of the CTC is temporary and will expire on December 31, 2021. Fortunately, the Build Back Better Act contains provisions that extend the current CTC expansions and monthly payments for another year, through 2022. Additionally, the bill seeks to permanently make the CTC fully refundable, to support low-income families with the most need. Excitedly, the bill passed the U.S. House of Representatives on November 19, 2021, and moves to the U.S. Senate for further consideration.