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The Child Tax Credit Will Likely Improve Educational Performance

Alleviating financial stress in the home environment with pro-work policies like the CTC can transform the largest determinant of educational outcomes for children.

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Education is often regarded as one of the most consequential gateways to opportunity.

This typically rings true — while most people don’t experience a rags-to-riches story of success through education, outcomes from the classroom environment often have a sizable determining effect on a young person’s economic future.

Our understanding of this places a societal premium on the importance of a good education for our kids — and rightfully so. What feels often overlooked, however, are the factors outside of the classroom that can have an inhibiting effect on our children’s education.

High on the list of educational obstacles that can negatively impact a child is poverty. Poverty is persistently linked with educational outcomes. For instance, a Canadian research group for the Pediatrics journal found that young children born in poverty had a greater likelihood of less school preparedness. It’s also well understood today that the home environment for a child has the largest significant factor affecting a student’s academic achievement.

Consequently, poverty and its effects on the home environment has large consequences for a child’s future success, as the advantages and disadvantages of financial stability at home are compounded over time.

Anti-poverty measures like the Child Tax Credit (CTC) act as an indirect but significant way to make educational opportunities more accessible and equitable. Because CTC fights poverty effectively, it improves educational outcomes, which in turn creates additional community benefits.

As the Peter G. Peterson Foundation explains, The Child Tax Credit is a tax policy that grants parents $250-$300 per child each month in its current form. The tax credit is refundable, as well, providing significant financial assistance towards easing the cost of raising children.

According to an article by the Center on Budget and Policy Priorities, policymakerscreated the CTC in the late 90s to emphasize work-based assistance programs. When a family starts earning more, they usually receive less government benefits. However, with CTC, the government rewards working families with funds which more than make up for the losses in benefits.

The CTC structure motivates families with the lower earnings to work, as it does not discourage them from earning above an income threshold until a combined annual income of $150,000. For additional information, the Peter G. Peterson Foundation provides an in-depth explanation and detailed graphics of how the CTC works.

The Child Tax Credit has been one of the most consequential programs for reducing poverty. In 2018 the Center of Budget and Policy Priorities analyzed census estimates and determined that the CTC and a similar policy called the Earned Income Tax Credit (EITC) lifted 10.6 million people above the poverty line, 5.5 million of which were children.

The CTC in its present form continues to prove itself as an effective anti-poverty measure by supplementing working families. According to a recent Urban Institute study on the American Rescue Plan (ARPA), the recent increase in amount and the monthly nature of payments versus a lump sum after filing taxes is estimated to nearly halve child poverty. The first payment of the expanded CTC alone has reduced the number of households with children experiencing food insecurity by 24%, according to a recent report from the US Census Bureau.

With this context in mind, it’s easy to see how the impacts of the expanded Child Tax Credit can support an increase in educational outcomes.

First, according to research from Stanford University, children in poverty are exposed to multiple risks at a time, both physical, like environmental conditions, and psychosocial, like family turmoil. These stressors negatively affect their bodies, especially the youngest children as they are especially vulnerable to their surroundings. The bodily changes are revealed through elevated blood pressure, stress hormones like cortisol and weakened areas of the brain that control language, working memory, long term memory, and executive control. The risks associated with poverty cause chronic stress, which in turn impairs critical skills for educational success.

If working families cannot use education to liberate children from poverty and change their life prospects, they’re often trapped in cycles of generational poverty. Dysfunctional family dynamics, low quality nutrition, and adverse environmental exposures brought on by financial insecurity all play a role in negatively impacting the home environment of children. The means to change their situation through policies like the CTC can alleviate some of these negative effects and prevent much of the mental and physical distress which compromises a child’s cognitive ability.

More directly, we can see that tax credit programs similar to the CTC do have effects on educational outcomes of children both in the current time and in the long run. An Institute of Child Success study determined that every $1000 tax credit increase leads to a 7.2% increase in standard deviation, which is a significant boost in math scores. When observing specific demographics, the study finds even larger increases for minority children.

Tax credit programs like the Child Tax Credit lead to clear increases in educational performance and have a disporatiatly beneficial effect to the most financially disadvantaged groups. The CTC not only benefits nearly all children, but also works towards providing social mobility to historically disadvantaged groups in the process.

CTC-like programs place more money into the pockets of families who need them, with a large impact on children. Tax credits give children the opportunity to perform better in school with more financial support and a less stressful situation at home.

Children deserve to have a fair chance to become educated and succeed in their future. If we invest in children now by preventing the expiration of the Child Tax Credit in 2021, we can expect to improve the educational outcomes for children who can then grow up and become successful and productive citizens.