Each September the U.S. Census Bureau releases new poverty and income data, revealing a snapshot of economic hardships experienced by children and families. Data released in 2024 on the Supplemental Poverty Measure, which accounts for non-monetary benefits, temporary cash assistance, and tax credits, showed that the rate of children living in poverty remained high, increasing from 12.4% in 2022 to 13.7% in 2023. The sustained increase in poverty is especially appalling after record-low child poverty rates in 2021 of 5.2%. This reflects the continued failure of our leaders to learn from policy successes during the COVID-19 pandemic and respond to the realities of families and children by making permanent evidence-based policies that reduce poverty.
In 2021, Congress cut child poverty in half by dramatically expanding the Child Tax Credit. Under major legislation to reduce the financial impact of the COVID-19 pandemic, the Child Tax Credit was temporarily increased, delivered monthly, and made fully refundable – meaning that for the first time children in families with little or no income received this support. The expansion benefited 90% of children in the U.S., raising families’ income and acting as a buffer against financial hardships. Families received up to $300 a month per child and were able to use the credit however they deemed best. Subsequent evidence has demonstrated that the primary uses were to cover the cost of food, rent, child care, and other essential needs.
In addition to cutting poverty in half, Children’s HealthWatch research found that the advanced Child Tax Credit helped families catch up on rent, improved parent physical health, and decreased household food insufficiency by 26%. When the temporary expansion expired and families stopped receiving the payments, food insufficiency rebounded. Research from others confirms the consequences of allowing the Child Tax Credit to revert to pre-pandemic levels and eligibility, including more financial stress and challenges affording essentials.
Permanently expanding the Child Tax Credit to be fully refundable, inclusive, and delivered periodically is a ready-made and proven solution to address child poverty and material hardship. In fact, new research shows that had an expanded Child Tax Credit been in effect in 2023, the child poverty rate of 13.7% could have instead been 8.6%. Fortunately, an anticipated large tax package in 2025 provides the opportunity for Congressional leaders to take permanent action on the Child Tax Credit and other changes to make our tax code more equitable. Children’s HealthWatch recommends the following priorities to reduce poverty, advance equity, and support the health and well-being of young children:
Pass a permanent, fully refundable, and inclusive Child Tax Credit that ensures all children, regardless of household earnings, family structure, and immigration status of children or adults, are eligible for the full credit.
Allow families to receive the Child Tax Credit in reliable, monthly payments to support budgets throughout the year.
Extend eligibility for the Earned Income Tax Credit to immigrants who file taxes with an Individual Taxpayer Identification Number (ITIN). Despite paying taxes, immigrant workers who pay and file taxes using an ITIN – as well as their U.S. citizen family members (i.e. mixed-status families) – are excluded from claiming the credit.
Reduce structural barriers to the Child Tax Credit by investing in effective, community-driven outreach efforts, establishing a permanent and accessible simplified tax-filing platform, and providing adequate resources to the Internal Revenue Service (IRS) to improve customer service and operations.
Amend the tax code to exempt direct cash transfers from means-tested public benefit calculations. This change will enable local governments to move forward with periodic payments of state tax credits without the threat of participating families losing their public benefits, including food assistance, housing, child care, and health care.
Without bold Congressional action, child poverty rates will continue to rise, jeopardizing the health and future prosperity of our children and communities. Anticipated tax reform in 2025 provides policymakers with the choice and opportunity to invest in the health of families with children by expanding evidence-based refundable tax credits and raising revenue to fully fund essential safety net programs. Children’s HealthWatch will steadfastly continue our work to achieve health equity for young children and their families by partnering with Congress to pass research-driven expansions of the Child Tax Credit and Earned Income Tax Credit, protect public benefits from disruption, and strengthen our social safety net.
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