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Almost 450 economists signed a letter in favor of extending the enhanced child tax credit

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As Democrats debate whether to extend the enhanced and fully refundable child tax credit (CTC) past this year, almost 450 U.S. economists have come out in support of doing so.

In an open letter to Congressional leaders, the 448 economists — which span institutions and include several Nobel Prize winners in economics — write that there is robust research indicating the expanded CTC "can dramatically improve the lives of millions of children growing up in the United States and promote our country's long-term economic prosperity" by reducing child poverty.

In fact, expanding the credit through 2025 would reduce child poverty from 14.2 to 8.4%, a recent analysis from the Urban Institute found. That's 4.3 million fewer children living in poverty — a 40% decrease.

The CTC was changed in two key ways in 2021 as part of the Democrats' American Rescue Plan: It was increased from $2,000 to as much as $3,600, and it was made fully refundable, meaning even the lowest-income Americans can receive it. Eligible families began receiving the first of six monthly payments in July.

Those changes have been especially beneficial for low-income families over the past three months. Food insecurity dropped significantly after the first payment, as many families used their deposits to buy groceries. Others bought school supplies and clothes, and paid utility bills, Census data showed.

Research has shown that reducing child poverty has lasting positive effects for low-income kids: they are healthier, do better in school and are more likely to be employed and earn more as adults. These are key reasons so many economists support making the enhanced CTC permanent, says Jacob Goldin, an assistant professor at Stanford Law School who specializes in tax policy and helped organize the letter.

"It's very rare to find an issue where so many economists agree on everything," Goldin says. "But there's just very, very strong evidence that providing extra financial assistance to kids growing up in low-income households yields big benefits in their lives."

One of the key debates in Washington right now is whether or not parents should be required to work in order to receive the credit. As with other social safety net programs, some politicians argue that parents will have no incentive to work if they know they will receive a monthly check from the government.

But Goldin says research indicates income provided through the program does not meaningfully affect employment. And because the credit does not begin to phase out until relatively high levels of income — $75,000 for single parents and $150,000 for married couples — there is no incentive not to work. The full amount of a household's CTC payments won't decline.

What the research summarized in the letter shows "is that a work requirement would exclude the very children who have the most to gain from receiving the benefit," Goldin says.

Though it is still not a sure thing that Democrats will make the expanded CTC permanent, Goldin is "optimistic" that they will.

"Democrats will want to make sure that families keep getting these payments each month," he says.

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