By Ashley Burnside

One year ago, President Biden signed the American Rescue Plan Act of 2021 (ARP), which—among other critical investments—temporarily expanded tax credits that dramatically reduced child poverty and food insecurity. The Act expanded the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), which are refundable tax credits that financially support families with children and low-to-moderate income workers during tax time. The ARP made both tax credits available to more people with low incomes and increased the credits for tax year 2021. We know the ARP effectively reduced child poverty and food insecurity, and we should maintain this momentum in the years ahead. Recognizing how important the temporary expansions to these credits were for families and workers, Congress should make the CTC and EITC expansions permanent. Doing so will address the ongoing financial hardship of workers and families and continue reducing child poverty.  

The ARP temporarily expanded the CTC by increasing the credit for qualifying families to $3,600 for each child ages 0 through 5 and to $3,000 for each child ages 6 through 17. The ARP also made the CTC fully refundable, meaning it was available to the families with the lowest incomes who were previously not eligible for the full credit. And the law made the CTC available in monthly installments to parents from July through December 2021, providing regular payments to help with ongoing expenses. Parents can get the remaining half of their expanded CTC payment in a lump sum when they file their 2021 tax return this spring.  

The temporarily expanded CTC reduced child poverty and food insecurity in 2021. The CTC expansions especially benefited Black and Latinx families, as well as families with the lowest incomes, who were more likely to miss out on the full credit under prior law due to making too little in income. The monthly CTC payments were tied to reductions in food insecurity for families with children, according to the U.S. Census Bureau. Survey results from CLASP and partners showed the monthly CTC payments also reduced financial stress for families and made it easier for some parents to work outside of the home. 

According to the CLASP survey results, the most common way that parents reported spending their monthly CTC payments was toward bills, food and groceries, and rent/mortgage payments. While these expenses didn’t end for families in 2022, the CTC monthly payments have unfortunately expired. Families haven’t received a monthly payment since December 2021. In January 2022, after the monthly CTC payments ended, 3.7 million more children were living in poverty, and Black and Latino children experienced the largest percentage-point increases in poverty. 

The ARP also temporarily expanded the EITC for workers without dependent children in the household. Under prior law, these workers were only able to get a very small EITC amount, and young workers were excluded from the credit altogether. The ARP tripled the EITC available to workers without kids in the household, with the maximum credit increasing from $543 to $1,502. The ARP also made workers eligible for the EITC beginning at 19 years old (as long as they meet the other EITC eligibility criteria.) Former foster care youth and young people who are homeless are eligible beginning at age 18. Under prior law, workers were only eligible beginning at age 25.  

Young workers will receive the increased EITC when they file their 2021 tax return this spring. The expansion will provide support to over 17 million people who work for low pay. This additional money from the credit will come in tax refund checks and can help young workers afford larger expenses like car repairs, student loan debt, and rent. But the changes to the EITC are also only for tax year 2021 and will expire after this tax season ends unless Congress acts.  

Lawmakers passed the ARP to support families and workers during unprecedented financial hardship, and evidence demonstrates it worked. Poverty rates and food insecurity rates went down despite a global pandemic and extreme economic turmoil. The ARP is proof that lawmakers know how to eradicate poverty; it is just a matter of passing the policy initiatives to make it happen. Sadly, families and young workers are still facing financial hardship in 2022. As these tax credit expansions expire, families will be unable to afford nutritious meals for their kids, pay all their bills, or afford their rent. The expansions passed under the ARP were historic, and Congress should make them permanent so we can continue to invest in children, families, and young workers.