In 2021, Congress enacted sweeping legislation that temporarily cuts child poverty in half. A key feature is the expansion of the Children’s Tax Credit (CTC), which has lifted 5.3 million people out of poverty, including 2.9 million children. Since credit returned to its bases before 2021, child poverty has rebounded, and families have once again struggled to make ends meet.

Democrats failed to include the most generous benefits in the 2022 Inflation Cut Act. Now, advocates are pressing Congress to include the enhanced Counter-Terrorism Committee restoration in any tax bill introduced during the post-election hearing. They want to include a return to three key features of the expanded CTC for 2021: fully refundable, higher credit amounts, and a monthly payment option.

Besides reducing poverty, these monthly CTC payments from July to December also helped smooth incomes through 2021. Multiple surveys showed subsequent decreases in food insecurity and lower reliance on credit cards and high-risk financial services.

But, a new analysis shows that these benefits of boosted CTC were short-lived. By July 2022, six months after the monthly payments expired, 60 percent of parents with incomes below $75,000 who previously received the monthly CTC report now report having difficulty meeting regular expenses.

In 2021, Congress raised the CTC cap from $2,000 per child under 17 to $3,000 for those ages 6 to 17 and $3,600 per child under six. Importantly, for the first time, most children with very low incomes received the maximum benefit, thanks to a provision that allowed for full refunds.

Parents reported that they most commonly used CTC payments to purchase food, followed by purchasing clothing and paying for utilities. Policymakers should be proud of this result. Food insecurity is an intractable problem that hurts children. It was a particular problem during the pandemic. It is linked to decreased cognitive development and poor health, among other negative effects.

Increased credits to very low-income families and delivery of monthly payments have helped reduce food insecurity. Data from the Urban Institute's Basic Needs and Well-being Survey showed that the majority of low-income parents like the monthly option (see figure). The majority of low- and middle-income Hispanic and black parents in another survey reported that the monthly payments made them feel the government cares about their family's health and well-being.

With rising inflation and new evidence that parents are struggling without the monthly interest, Congress could preserve some of the benefits of the 2021 Terrorism Act by restoring full recoverability, higher credit amounts, and monthly credit delivery. Doing so would keep child poverty at historic lows and give parents the option of receiving regular payments to meet ongoing needs.