The 2021 Child Tax Credit and Children's Health and Well-Being: Evidence From a National Longitudinal Study

Policy Points Evidence suggests the 2021 temporary Child Tax Credit expansion reduced material hardship and improved parental mental health, but less is known about its effects on child well-being. Compared with the preexpansion period, advanced monthly payments were associated with short-term improvements in child behavioral health. However, these gains did not persist after payments ended, even with the lump-sum payment, likely reflecting stress and hardship tied to the policy's temporary nature, especially among lower-income and Black children. Policymakers may need to consider program design features, such as more frequent distribution of unconditional cash benefits, to better support child well-being.

In July 2021, to alleviate material hardship, Congress temporarily expanded the Child Tax Credit (CTC), one of the largest income transfer programs in the United States. Prior research has linked the expansion to improvements in material hardship, food insecurity, and parental mental health. This study is among the first to examine its association with child well-being.

We analyzed data from 1,028 children in the 2020-2021 waves of the Child Development Supplement of the Panel Study of Income Dynamics, a national longitudinal data set. CTC exposure was defined based on benefit size calculated using eligibility rules. Outcomes included caregiver/self-rated child health, behavioral problems, and food security. We used individual fixed-effects models to estimate within-person changes in outcomes, comparing pre- and postexpansion periods while adjusting for time-invariant confounders. The 2021 PSID wave (November 2021-June 2022) included three CTC phases: 1) advanced monthly payments (November-December 2021), 2) expired monthly payments (January-April 2022), and 3) following the distribution of remaining lump sum (May-June 2022). Analyses were stratified by these phases to capture potential disparate impacts. We also conducted subgroup analyses by income and race/ethnicity.

During the monthly payment period, a $1,000 increase in CTC was associated with a 0.69-point reduction of behavioral problems in the overall sample (95% confidence interval [CI]: -1.31 to -0.067), corresponding to a 10% reduction from baseline. No associations were observed after monthly payments expired. Following the distribution of the lump sum, lower-income children had worse caregiver/self-rated health (-0.075, 95% CI: -0.14 to -0.010) and increased behavioral problems (0.95, 95% CI: 0.45-1.45) compared with higher-income children. Differences by race/ethnicity were also observed.

More frequent distribution of unconditional cash benefits may improve child behavioral health. These findings inform ongoing state and federal poverty policymaking and contribute to theoretical knowledge on income and child health.