Contact: Kristie Eshelman

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WASHINGTON, DC, Aug. 2, 2021 – A new analysis from the Niskanen Center shows that the recent expansion of the child tax credit will enable $ 27.6 billion in new household expenses, support over half a million new jobs, and boost the economy of rural America , special.

The report, entitled “Measurement of Child Tax Credit’s Economic and Community Impact,” derives new estimates of the historic expansion of Child Tax Credit (CTC) from the US rescue plan. The CTC offers families tax breaks and income support in the form of a prepayment and has been paid monthly since July 15, 2021, reaching nearly 60 million children in 39 million households. Most households now receive payments of $ 300 per month for each child under the age of 6 and $ 250 per month for children ages 6-17, with benefit amounts tapering off on higher incomes.

Though only in effect for one year, the expanded CTC aims to reduce child poverty by 40% and support investments in children that promote family stability. However, it is less appreciated how child benefits like the CTC can serve as a powerful economic stimulus for local communities given the greater consumption needs of households with children. The new Niskanen Center report gives figures on these impacts. The full estimates by state and district are available here.

The report uses modeling techniques to infer the likely impact of the CTC on the state and local economies, including job growth and sales tax revenue increases. In Florida, for example, the new portion of the CTC is expected to return $ 5.6 billion to Florida families, boost $ 1.6 billion in new household spending, generate $ 91 million in state and local sales tax revenue, and the equivalent of 33,000 temporary jobs at the state median wage.

Taking into account population size, the report finds that the structure of the CTC extension provides greater net benefits for states with lower median incomes and larger median family sizes. For example, the larger average family size in Utah helps bring the full value of the CTC to $ 929 per capita or $ 2,826 per household in the state.

In relation to the gross domestic product of the states, the CTC offers the greatest relative benefits for rural states with lower economic output. For example, the total value of the CTC for Idaho households is now 1.8% of Idaho state GDP. In other words, for every $ 100 of gross income in Idaho, $ 1.8 is now from the CTC. For households in Mississippi, the net growth of the CTC alone after the reform of the ARP amounts to just under 1% of the GDP of the state of Mississippi.

Across the country, the total value of the CTC for rural households is now 1.35% of GDP outside metropolitan areas, compared to just 0.88% of GDP in metropolitan areas. As report co-author Samuel Hammond noted in an exclusive interview with the Washington Post, “This suggests that the CTC expansion will bring a significant boost to the rural economy across the country.”

“If Social Security were to be abolished, no one had any doubts that the economy of rural America would collapse,” continued Hammond. “The extended child tax deduction leads this thought experiment in the opposite direction.”

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