The effects of the monthly and lump-sum Child Tax Credit payments on food and housing hardship

In March 2021, the US Congress passed the American Rescue Plan (ARP), which included a large but temporary expansion of the Child Tax Credit (CTC). This study investigates the effects of the expanded CTC on two key indicators of material hardship: food insufficiency and not being caught up on rent or mortgage payments.Prior to the expanded CTC, tax filers could receive a maximum of $2,000 per child per year, but because access was conditioned on positive family earnings, many children were excluded (Crandall-Hollick 2021, 2018; Garfinkel et al. 2016). One in three children, and half of Black and Latino children, were ineligible for the full benefit value because their households did not earn enough to qualify (Collyer, Harris, and Wimer 2019). The ARP made the CTC available to almost all children, including those in households with the lowest incomes who had been previously excluded, by removing the earnings requirement and making the credit fully refundable. It also raised the maximum annual credit amounts to $3,000 for children ages 6-17 and $3,600 for children under age 6 and delivered half of the credit in monthly installments of up to $250 per older child or $300 per younger child for six months beginning mid-July 2021. A lump-sum payment of up to $1,500 (over age 6) or $1,800 (under 6) was provided around March 2022 upon tax filing.Our findings on the CTC's effects on food and housing hardship are consistent with earlier research that studied the consequences of the initial monthly payments for food hardship (Parolin et al. 2021; Perez-Lopez 2021; Shafer et al. 2022) but expand on that work by using stronger research design to isolate plausibly causal effects, studying housing hardship in addition to food hardship and assessing the differential effects of the lump-sum as well as monthly payments. Previous theoretical literature (Thaler and Johnson 1990) and empirical work on other types of government payments (Shaefer, Song, and Shanks 2013; Sykes et al. 2015) suggest that households treat lump-sum payments differently from monthly payments, reserving the former for larger expenditures and debt repayment and the latter to meet ongoing, basic needs such as groceries. We find that households respond to the CTC in exactly this way, with food insecurity declining during the monthly payment period and rent/mortgage arrears falling during the lump-sum payment period.