Model Introduction¶
Estimating the Labor Supply Response to a Permanent Child Tax Credit Expansion
By: Alex Brill, Kyle Pomerleau, and Grant M. Seiter
The American Rescue Plan Act of 2021 (ARPA) temporarily expanded the child tax credit (CTC) for 2021 by allowing households to claim up to $3,600 for each child under age six and $3,000 for each child age six to seventeen. The credit was also made fully refundable and advanceable.
We analyzed the impact of a permanent CTC expansion on employment using Tax-Calculator, an open-source microsimulation model of the federal individual income and payroll tax, along with a method similar to the model and set of assumptions employed by the Congressional Budget Office (CBO). According to our calculation, the likely impact of the CTC expansion on employment will be -296,000 full-time equivalent jobs (+/- 155,000).
This document provides a technical description of the methodology and summarizes our results. Replication files are availabile in the project’s GitHub repository.