Effects of the Expanded Child Tax Credit (CTC) on Household Time-Use

Background

The Child Tax Credit (CTC) has been enacted since 1997 and has expanded multiple times with bipartisan support since 2001. Under current law, the credit is worth up to $2,000 per eligible child (under age 17 at the end of the tax year) (CBPP, 2022). In March 2021, Congress passed a one-year expansion to CTC that substantially modified the structure and impact of the credit. First, the benefit was fully refundable, making it available for families regardless of tax liability. Second, the size of the credit increased for all children, $3,600 per child under the age of 6 and $3,000 per child aged 6 to 17. Third, the earning minimum was removed, allowing more families to be positively impacted by the credit. Lastly, it issued half of the credit through advance monthly payments (IRS, 2022).

Purpose

Early studies documented the positive impact of the expanded CTC on reducing poverty and economic well-being. However, there is limited research on time use, particularly regarding children. Research indicates that additional income improves children’s achievement (Duncan et al., 2011), but how changes in income affect parental time on children remains largely unknown. Given the connections between income during childhood and later health and achievement, examining how programs that increase income affect family dynamics is essential for theory and policies. This study addresses these gaps in the literature by examining the immediate-term impacts of the expanded CTC receipt on the quantity and quality of time parents, and their children spend together in various activities.

Data and Method

The study will employ a simple difference-in-difference approach to estimate time use changes related to children’s care. It will use data from the American Time Use Survey (ATUS) to compare total parental time spent with children and that spent with them in primary care, secondary care, and educational activities in July-December 2021 (CTC expansion period) relative to July-December 2019 (non-CTC expansion period prior to the COVID-19 pandemic), net of sociodemographic characteristics.

Results

The study finds negative associations between the expanded CTC and short-term changes in parental time spent on children. However, considerable heterogeneity was found in household structures, especially within households for younger children. Single mothers displayed a great decrease in their time with children. While single fathers spent more time with their children than fathers in two-parent household.

Policy Implications

This study provides new evidence on the potential spillover effects of the expanded CTC with respect to parental time investments in children. Such effects are important to consider in weighing the total costs and benefits of the policy.