Abstract: The Impacts of the Child Tax Credit on Financial Resilience and the Use of High-Cost Financial Resources (Society for Social Work and Research 29th Annual Conference)

Schedule:

Saturday, January 18, 2025

Redwood A, Level 2 (Sheraton Grand Seattle)

* noted as presenting author

Stephen Roll, PhD, Assistant Professor, Washington University in Saint Louis, St Louis, MO

Leah Hamilton, PhD, Professor, Appalachian State University, Boone, NC

Haotian Zheng, MSW, PhD Student, Washington University in Saint Louis, St. Louis, MO

Mat Despard, PhD, VP, Research and Policy, Saver Life, NC

Background

The Child Tax Credit (CTC) expansion in 2021 was a significant policy change in the United States, aimed at reducing child poverty and supporting families during a challenging economic period. Given the high costs associated with raising children and the exacerbated economic uncertainties due to the COVID-19 pandemic, this study investigates the impact of the CTC on household financial resilience and the utilization of high-cost financial resources.

Methods

This research utilized a panel survey design with a nationally representative sample, comparing 1208 CTC-eligible parents to 1381 ineligible households. The study employed a Lagged Dependent Variable approach combined with multinomial logistic regression to analyze changes in emergency savings, credit card debt, and the usage of various high-cost financial resources before and after the CTC expansion.

Results

The expansion of the CTC was associated with positive financial outcomes for eligible families. There was a noticeable increase in the access to emergency savings among CTC recipients compared to the control group. Moreover, there was a significant reduction in the reliance on high-cost financial resources, such as auto title loans, payday loans, pawn shop loans, and the selling of blood plasma. Specifically, the study found that the CTC expansion led to a decrease in the total number of high-cost financial resources used by households, indicating an improvement in financial stability and resilience.

Conclusion

The temporary expansion of the CTC in 2021 demonstrated substantial benefits in enhancing financial resilience among eligible families and reducing their dependence on high-cost financial resources. The findings underscore the potential of policy interventions like the CTC expansion in addressing broader social challenges, such as reducing economic inequality and building financial capability. While the CTC's expansion was not made permanent, the results provide compelling evidence for the continuation or introduction of similar pro-family economic policies.