The Potential Long-Run Implications of a Permanently-Expanded Child Tax Credit

Elizabeth Ananat and Irwin Garfinkel

No 32870, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: For many of those who worked to include an expanded Child Tax Credit in the 2021 American Rescue Plan, an important motivation was to test the feasibility and effectiveness of a permanent U.S. child allowance similar to those provided in other rich countries. Because this expansion was short-lived, however, evaluations of its effects cannot provide complete evidence on the long-run effects of a permanently expanded CTC. We leverage theoretical predictions from standard economic models, behavioral science, and child development frameworks, along with empirical evidence from literature evaluating previous long-term cash and quasi-cash transfers to families with children, to predict the likely long-run impacts of a permanent child allowance. We find that it would lead to increased future earnings and tax payments, improved health and longevity, and reduced health care, crime, and child protection costs; using conventional valuations, benefits to society outweigh costs nearly 10 to 1, with most benefits due to credit refundability.

JEL-codes: H31 I38 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-hea and nep-pbe
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