On December 15, 2021, the final batch of payments for the expanded Child Tax Credit (CTC) went out to more than 36 million families across the U.S. This iteration of the Child Tax Credit program expanded eligibility for low-income families, raised the age of children considered, and increased monthly payments. While the future of the policy is uncertain, an expanding body of academic and grey literature demonstrates that this expansion was an effective policy measure.

The expansion of the Child Tax Credit had a historic impact on child poverty. Experts credit it with reducing child poverty by more than 35 percent. Researchers also found that payments led to a whopping 25 percent decline in food insufficiency among low-income households with children. A review of the financial transactions of low-income families in 2021 found increased spending on items like groceries, education, and health care as well as a reduction in overdraft fees. Further, initial research has found that the expansion did not have negative short-term employment effects.

The final cycle in 2021 of the Household Pulse Survey (HPS) also provides insight into how American families spent their last payment from the expanded Child Tax Credit program. The survey, which engaged with a representative sample of Americans from December 29, 2021, to January 10, 2022, shows the broad impact of this now-temporary expansion.

Of families who received the expanded Child Tax Credit payment, 41 percent reported mostly spending the money, 21 percent reported mostly saving it, and nearly 37 percent reported using the money to pay down debt.

Many Americans shared that Child Tax Credit money helped them meet their basic needs, allowing them to pay for utility bills, food, child care, and rent or mortgage payments. These spending patterns are consistent with prior research on the ways that families used the Child Tax Credit. Families spent this income in ways that made the best sense for their circumstances.

According to the HPS and other studies, the use of the Child Tax Credit varied by race and gender. Women were more likely to report receiving an enhanced CTC payment and were slightly more likely to need to spend the money rather than save it when compared to cisgender men. White families were more likely to be able to save the expanded CTC money, while Black and Hispanic identified families who received it were more likely to either spend it or use the money to pay down debt. Furthermore, families who were classified by the survey as Hispanic were more likely to report not receiving the CTC payments when compared to families who identified as White. These patterns demonstrate the burden of the gender and racial wealth gap, emphasizing the need to invest in bold, equitable policy solutions to help all families build wealth.

One innovative aspect of the more inclusive CTC was the way that money was distributed. The credits were largely direct transfers and were not aggressively means-tested. The messaging around the credit was refreshing.  Instead of being wrapped in anti-poor bureaucratic tape, it was put forward as a critical investment in America’s families. As a result, some felt the no-strings-attached payments allowed them to preserve their dignity, choosing to spend the money on what they felt their family needed most. Other social support programs such as SNAP and TANF provide targeted money but come with significant administrative burdens, rooted in a history of welfare skepticism. The expanded CTC focused on directing money to families rather than on limiting eligibility.

Importantly, the expansion of the Child Tax Credit program was a policy lever, not a panacea. Administering social support policies through the tax infrastructure is an imperfect policy solution. While considered an “expansion,” the program still excluded some of the most vulnerable people, including undocumented families, families experiencing houselessness, and those disconnected from financial systems. Additionally, the emphasis on children reflects a particular perspective of who is deserving of support.

Despite these limitations, the enhanced CTC offers an example of a bold investment in families. While Congress considers the future of similar policies, advocates can take heart in progress and a growing evidence base. Researchers largely agree that the permanent expansion of this program would broadly benefit families with children. Broad, direct payments to parents of young children work. These payments reduce hunger and poverty and deliver support with dignity—without a negative impact on employment.

Expanding the Child Tax Credit was a historic policy moment and a hopeful national experiment on how recurring payments to families with children can impact economic security. Thankfully, many advocates in Congress are pushing for a path forward. As Representative Pramila Jayapal shared ahead of the recent State of the Union, in regard to the Child Tax Credit: “As inflation skyrockets due to supply chain issues stemming from the pandemic and corporate greed, relief that puts money directly into the pockets of the American people is more critical than ever.”

IWPR is a proud partner in the fight to reduce poverty for women and families through research that informs bold policy solutions like the expanded Child Tax Credit. This spring, we look forward to spearheading conversations to build women’s economic security and more at the Power+ Summit.