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Report: Expansion of Child Tax Credit Helped California Families in Safety-Net Programs Claim $3.8 Billion

Berkeley, October 26, 2022 – A new report and accompanying data point by the nonpartisan California Policy Lab (CPL) finds that more than 380,000 California children enrolled in safety-net programs benefited from the 2021 expansion of the federal Child Tax Credit (CTC). The CTC was significantly –but only temporarily– expanded by Congress under the American Rescue Plan Act (ARPA). Congress increased the value of the credit and made more children eligible, including by eliminating a minimum income requirement, which meant that children in very low-income and no income households could now claim it. The researchers estimate that as a result of the ARPA changes, about one quarter of California children enrolled in safety-net programs became newly eligible to claim the CTC.

To measure how many low-income families benefited from these changes to the CTC, the California Policy Lab, in collaboration with the California Department of Social Services and the Franchise Tax Board, linked CalFresh and CalWORKs enrollment data to state tax filing and earnings data. All data was anonymized.

“About 3 out of 4 children enrolled in safety-net programs in California received the expanded Child Tax Credit, providing more than $3.8 billion in credits to these families,” explains co-author Hilary Hoynes, a public policy and economics professor and the Haas Distinguished Chair in Economic Disparities at the University of California, Berkeley. “However, we also found that families with incomes below $5,000 were the most likely to miss out on the expanded credit, highlighting the need to improve how this credit is distributed so that it reaches all of its intended audience.”

Key Findings:
1. An estimated 610,000 California children enrolled in safety-net programs became newly eligible for the CTC under the ARPA changes. Put differently, one quarter of all children enrolled in CalFresh or CalWORKs became newly eligible for the CTC, resulting in $3.56 billion in new credits becoming available, over and above the credits they were eligible for under TY 2020 —and current— law.

2. Almost a quarter of the potential gains from the ARPA expansion remain unrealized because not all eligible children were claimed on a TY 2020 tax return. Of the 610,000 California children who became newly eligible under the ARPA, the researchers estimated that 381,000 (62%) actually benefited from the expansion. That leaves over $900 million in ARPA CTC payments undistributed, or $3,700 per eligible unclaimed child.

3. Income is the single most important determinant of whether families actually benefited from the expanded ARPA CTC. Families earning above $5,000 received 90-95% of the expanded credit dollars made available to them through the ARPA CTC, underscoring the power of reaching those families through the tax filing system. By contrast, families with no wage earnings—who are less likely to file taxes because many are not legally obligated to do so—received just 58% of the dollars they were supposed to under the ARPA CTC, demonstrating the additional work needed to be done to ensure these families receive benefits delivered through the tax code.

The California Policy Lab creates data-driven insights for the public good. Our mission is to partner with California’s state and local governments to generate scientific evidence that solves California’s most urgent problems, including homelessness, poverty, criminal justice reform, and education inequality. We facilitate close working partnerships between policymakers and researchers at the University of California to help evaluate and improve public programs through empirical research and technical assistance.

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