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Monthly Child Tax Credit Insulated Families From Inflation, Steered Parents Away From Predatory Lending


70 percent of parents receiving the monthly credit who were negatively affected by inflation reported said the monthly payments helped them better manage higher prices

Published on April 18, 2022

New research finds the monthly Child Tax Credit significantly improved the financial security of eligible families amid rising costs, even causing a sharp decline in households seeking high-cost financial services such as predatory payday loans and selling blood plasma.

In the study, published with the Global Economy and Development program at Brookings Institution, researchers at the Social Policy Institute at Washington University in St. Louis and Appalachian State University surveyed over 1200 households eligible for the credit and covered a wide-ranging series of topics related to family finances, work, and health.

“While the Child Tax Credit still exists, this study demonstrates that the monthly payments were far more beneficial for working families than lump sum payments are,” said Paolo Mastrangelo, Head of Policy and Governmental Affairs for Humanity Forward. “As more Americans turn to desperate measures to make ends meet, we at Humanity Forward turn to Congress to reach immediate compromise and a bipartisan path that ends this disruption of monthly support for American families.”

70 percent of parents receiving the monthly credit who were negatively affected by inflation reported said the monthly payments helped them better manage higher prices. In addition to a sharp decline in reliance on alternative income sources like payday loans, CTC-eligible households reported declines in credit card debt, improved management of emergency expenses, and a significant decline in evictions.

The report also found significant data in relation to work and professional development, concluding that there were no statistically significant changes in employment between households receiving and not receiving the credit during monthly payments, and that CTC-eligible households were more likely to start learning new professional skills than ineligible households.

Households receiving the credit were more likely to afford balanced meals with better fruit and protein consumption. This is consistent with previous data from the U.S. Census Bureau, which reported that hunger in CTC-eligible households declined by 24% after the first monthly payment of the credit in July 2021.

Unfortunately, many of these gains are expected to be lost without a return of monthly Child Tax Credit. A report from Columbia University’s Center on Poverty and Social Policy found that child poverty, which had been reduced by 3.7 million thanks to the Child Tax Credit, increased by 41% following the expiration of the monthly payments.

“Choosing not to extend these [monthly] payments beyond 2021,” concluded the report, “puts all these short-term gains at risk while also preventing families from experiencing the long-term benefits provided by increased economic security.”

Associate Writer