10 Families across 8 months: studying the impact of the Child Tax Credit on Propel users

FEBRUARY 10, 2023

This week President Biden called on Congress to bring back the expanded Child Tax Credit in his State of the Union Address. It’s no wonder, since the child poverty rate dropped by an astounding 40% from 2020 to 2021 –thanks to the Child Tax Credit and other relief programs. The American Rescue Plan Act (ARPA), enacted in March 2021, transformed the Child Tax Credit into a near-universal, monthly cash transfer for families with children under 18. ARPA advanced half of the Child Tax Credit (CTC) in monthly payments; increased the maximum credit per child; and expanded it to include families that earned little or no income. The result was that most American families with children under 18 received monthly payments ranging from $250–300 per child. This provision was historic in its reach, flexibility, and delivery.

While the CTC reached most American families with minor children, we anticipated its impact would be deepest both materially and psychologically among the families living on the lowest incomes. This is why we decided to study the impact of the CTC advance payments, quantitatively and qualitatively, on the over 5 million households that use the Propel app to manage their SNAP benefits.

In July 2021 we recruited 10 families that were eligible for the CTC from across the country, with varying household compositions, incomes, backgrounds, and employment statuses. We followed them for 8 months, interviewing and surveying them for the duration of the advance CTC payments, plus a month before and after the payments. In addition, we surveyed a large sample of Propel users each month on their household’s wellbeing.

While our monthly household survey was a rich source of information on the impact of these payments, the 10 families we followed shed light on the way that the CTC allowed them to feel a bit more like any other family for six months.

More money had a positive impact on every family

On monetary issues large and small, the monthly cash infusion unlocked doors and provided relief in ways that recipients did not expect. Many of the families we spoke with were skeptical of the payments, distrustful that they would come regularly or dubious of how much they could rely on the money. But in the months that followed, we bore witness to the small and big moments where the money made a difference.

Andrea*, a mother of three in Pennsylvania, decided to start homeschooling her children after the COVID-19 pandemic began. The CTC payments allowed her to decorate their home classroom into a fun, bright space to encourage learning as well as play. When Julia*, a mom of three in Texas, found out that her mother was sick and hospitalized, the CTC payment gave her the financial breathing room to send money to help cover medical costs. Holly*, a mother of four in Michigan, was able to buy her children Christmas gifts for the first time. The CTC allowed her to get her children exactly what they asked for after relying on programs like Toys for Tots the past 15+ years. As Gwendolyn*, a mother of two in Georgia, noted,

“[The CTC] really lightens the burden of taking care of children because providing for their needs is expensive. They always need something, you know, new clothes or feet are expanding. You need new shoes. You don’t want to send your children any type of way to school.”

But families with greater stability saw the greatest impact

We started to see, as the months went on, that the impact of the monthly payments depended on how stable the family’s situation was before the first CTC deposit. As is common with most households living on lower incomes, month-to-month finances can be manageable until one emergency or unexpected expense throws off the balance. When that happens, it can take months or years to recover. For the families who barely scrape by or often fall short each month, the CTC payment provided a true safety net, catching families before they fell down that potentially dangerous spiral.

Adela* and her son were one such family. Despite being eligible, Adela didn’t receive a single cent of her CTC payments until March of 2022 when she filed her taxes. The advance CTC payments would have made an unimaginable difference in her life. A single mother of an autistic son, Adela’s husband died unexpectedly in 2020. Despite being in the middle of years’ long battle with cancer, Adela started working nights to pay rent and spent the days caring for her son. When Medicaid changed their coverage, she suddenly needed to pay hundreds of dollars more each month for her cancer medication. Picking up extra shifts was all she could think to do. Had she received her monthly CTC payments, she might have been able to pay the price difference in her medication, get more rest to battle her illness, and be there for her son more often at night.

For the families who had steadier income before the CTC payments, the monthly deposit allowed for breathing room, turning what could have been emergencies into manageable events. Venessa*, who works full time as a warehouse worker, lives with her two toddlers and her husband, who’s a stay-at-home dad. Venessa missed a week of work due to illness after getting the COVID-19 vaccine. The $600 CTC payment took the pressure off of missing a week of work. It allowed her to recover, and she did not have to miss out on important family time to make up for the missed wages with extra hours in the following weeks.

For the families that had stable employment, the CTC allowed them to fulfill their dreams. While they were doing well enough to get all the bills paid before the CTC payments, there was little or no wiggle room to get ahead. Charlotte*, a long-time state employee and a single mom of two teenagers, dreamed of owning her own house like many Americans but a low credit score stood in her way. With the latitude provided by the CTC payments, she could cover her kids’ school costs and sports uniforms, as well as pay for a service to improve her credit score. Each month, her score improved, so that by the end of the 6 months of payments, her credit score was excellent and she was talking to realtors. In less than a year, the monthly CTC payments helped her turn her long held dream into reality. “You work at a goal for so long and then it’s finally here…I didn’t think it would be a reality. I’ve gotten approved for my loan. It’s here,” Charlotte told us after receiving her last advance CTC payment.

The experience of receiving the advance CTC payments affected its impact on families

Families in our project had many experiences with government systems before the CTC. Like many other low-income families, they had little trust in the government, and the IRS in particular, due to previous negative experiences and the lack of transparency that comes with many government systems and decisions. Lack of trust in the system manifested in different behaviors among the families we followed.

By September 2021, Holly had called the IRS “at least 50+ times” in the past year to figure out why she hadn’t received the first 2 stimulus payments. She kept detailed notes of every call, including agent ID numbers, but received no answers as to why she’d gotten the advance CTC payments but not these stimulus payments. If she had received this money when she was owed, she’d have less than $1,000 left to pay on her home.

Naomi*, a mother of one teen and one elementary school age daughter in New York, kept the receipts from everything she’d purchased with CTC money. Even though she acknowledged that keeping receipts was not a requirement, she did so anyway, “in case down the line something happens, we have the receipt.”

Putting aside families like Adela’s, who didn’t receive monthly payments due to tax filing errors, those that did automatically start receiving the monthly CTC payments in July 2021 also faced difficulties. Nearly every month of the CTC payments was plagued by some kind of error–in July, some taxpayers, like Elena, who filed with an ITIN received both July and August payments in August. In August, some taxpayers received the advance CTC payment by mailed check, like Naomi, even if they had direct deposit information on file. In September, some families like Todd’s* experienced a delay for undisclosed reasons.

These errors led to a lot of frustration, worry, and further erosion of trust among Propel families. The first missing payment reinforced Elena’s initial assumption she wasn’t eligible for the CTC payments because she did not have a Social Security Number. Naomi had to spend $11–about 2% of the value of her CTC payment–to cash the check she received instead of a direct deposit. Todd’s missing September CTC payment had a huge impact on his family as it coincided with another financial shock. Todd and his wife are both in the process of applying for disability benefits so their only source of income before the CTC was their daughter’s Supplemental Security Income (SSI) payments and some part time work by his wife. Todd lost that income when his sister initiated a custody claim on his children. He was counting on the September CTC payment, but when he got nothing he started “freaking out”. His electricity bill was $200 and he owed a payment to Rent-A-Center on his couch. While he was able to make a deal to keep his couch, his wife lost their rented bike, and he drove for almost the whole month without auto insurance because he could not make the payment. Todd shared with us,

“When I’m promised something I expect to get it. I’m very grateful, but I’m hard on this because I have bills to pay. I thought I was going to lose everything this month.”

He received a partial payment ($500 instead of $800) on September 24th. Two months later, he finally got an explanation–the IRS had previously overpaid him and was deducting it from the subsequent monthly payments. It felt like too little, too late.

Denise*, a mother of 2 in Tennessee, had no idea about the expanded CTC before we recruited her for this project. She hadn’t filed taxes for a few years because she hadn’t been working. When the monthly payments first started, we tried everything to help Denise get the advance CTC payments. She logged into the CTC online portal and attempted to file through the simplified filing tools, only to hit mysterious errors that made it seem like she was ineligible despite being the caretaker of her two girls. Month-to-month our calls became a repetitive “nothing’s changed” until finally tax season. Unable to use an online tax filing service, Denise paid $275 for in-person help, only to find out there was a small error on her 2014 taxes. Once that was cleared up, she received a refund of over $12,000–her complete Child Tax Credit, as well as the stimulus checks she had not received. She was able to pay off her car and fill up the house with groceries. She told us, “I would have never known anything about the CTC if we didn’t have these [monthly] surveys and talked about it. I wouldn’t have known any better during tax time. It felt good to get an answer.”

A promise cut short

The promise of the new, expanded Child Tax Credit was cut short after a mere 6 months of advance payments. At the end of the project, we asked parents what a guaranteed CTC would unlock for their families, if they were able to receive it every month until their child turned 18.

Gwendolyn responded,

“Well, it would definitely allow us to do a little bit more, get out of the house. [Most] people take their children on vacation. I used to hear about [that] growing up. It seems like every year they have to go on a family vacation somewhere. But you know, it’s a two parent household, and so me with a single parent household, sometimes I will feel bad. […] It would definitely allow me to do a little bit more for my children. You know, give them a better experience. The ability to experience more, to be well-rounded, because it costs money to [help] children to be well-rounded. Getting them involved in activities, [whether] it be like a little summer camp, a little three-day summer science camp or anything like that. And, you know, take them somewhere like an aquarium or something educational that they can talk to their friends about at school. But it costs money to do those things. I would definitely like to sit down and write out a budget [if the CTC was permanent] and say, okay, this is what I’m going to allow them to experience [that’s] new this month.”

*Name has been changed

Methodology

When recruiting for this project, we sought to speak with families from a wide variety of experiences and economic situations. Spanning in age from 26 to 46 across 9 states, the only thing all families had in common was having children. Two participants were native Spanish speakers, and we conducted their interviews in Spanish. One family received SSI benefits, and seven of the 10 were working full or part time. Households had 1 to 4 children and most lived in urban environments, either large or small cities, with one family living in a rural town. Four were single parents, and all but one lived in rented or public housing. The average monthly CTC payment among participants was $635, and while 8 of the families received most advance payments, there were two families that did not receive a single monthly payment until they filed taxes in early 2022.

We touched base with each family twice a month from July 2021 through Jan 2022. Once, via survey in the middle of the month after the CTC payments were deposited, and then through a 30 minute phone call at the end of the month. In the survey we captured the timeliness, amount, method of receipt, and other specific details about the month’s CTC payment; while in the interviews we sought to understand how families spent the payment, and what else was going on in their lives as a direct or indirect result of the payment. Between those official communications, we created a private Facebook group for participants who were on the platform to meet each other and participants would also text us throughout the month with questions or concerns. During tax season (March — April 2022), we followed up with each family to hear how their tax filing process went and if they were successful in receiving the second half of the expanded CTC payment with their tax return.

Authored by Kaela Gallo and Julieta Cuéllar