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Boosting Take-Up of the Child Tax Credit

A University of California at San Diego (UCSD) SanDERA/Department of Economics Partnership Funded in part by Schmidt Futures

 

In 2021 Congress greatly expanded the Child Tax Credit (CTC), providing refundable tax credits to families with children aged 0-17, and relaxing the parental work requirement that the Child Tax Credit has included in recent years. This expansion is projected to substantially reduce child poverty in 2021.  Research has established that increases in family income can improve educational outcomes of students, so the sizeable new tax credits could make a real difference for students.

Families Can Gain a Lot – But Some of the Most Needy Families Are Not Getting the Credit

The temporary expansion to the CTC pays a direct cash benefit of $3,600 for children younger than five years old and $3,000 for children ages 6-17 in tax year 2021. The benefit is available to families even if they do not work and even if the child’s parents or other members of their household are undocumented. The cash benefit is being distributed by the IRS (Internal Revenue Service). Up to half of the credit is being paid out in monthly installments from July to December 2021, but in 2022 families must still file a tax return for 2021 to claim the second half of the credit. Families who did not receive monthly payments may still claim the full benefit by filing taxes for 2021.

Despite the ambitious goals of this program, takeup is incomplete: the US Treasury estimates that there are 25,000 children in San Diego County who are missing out on the CTC. One of the main reasons that families are not receiving the credit is that lower income families are not required to file income tax returns. This has lowered participation in the Child Tax Credit among limited income families, because families were identified to receive the credit mainly through data on past income tax returns.  

Project Goals

The UCSD research team is working with a number of school districts in San Diego County.  In early 2022 the districts will notify all parents of the UCSD research study and invite parents to participate in a short survey. The goal of the recruitment survey is to enroll parents in our research study. The later parts of the project, described below, will be run by the research team at UCSD and its local community partner. We will focus on families who qualify for the benefit, but are not collecting. Respondents will be randomly assigned to a treatment or comparison group. The researchers will then text and email parents in the treatment group short messages that inform families about details of the CTC and how they may claim it. Starting in February, we will encourage families in the treatment group to collect the CTC by filing a 2021 income tax return. Our partner, a local non-profit agency, runs an annual free tax preparation service for low- and moderate-income taxpayers (VITA). We will set up appointments for families in the treatment group to meet with a tax prep specialist. Tax specialists will answer questions about complex tax situations and address hesitancy and unique barriers.

Through the generous help of our district partners, we will measure the direct effect of the intervention on test scores and other academic outcomes such as grades/class performance and attendance. The tax preparation specialists will collect information about study participants and services provided. Later we will survey parents about self-reported CTC receipt, experiences with the CTC program, reasons for non-participation, and other outcomes of interest (self-reported expenditure on child, participation in extracurricular activities, child and parent mental health, and labor supply). Additionally, for parents who provide consent, we anticipate a partnership with the United States Treasury, which would allow us to measure the direct effect of our information intervention by using administrative tax records that include data by group (but never reported by individual family) on average income, household composition, and receipt of the CTC.

Project Leadership 

The Co-Investigator and Project Director is doctoral candidate Beata Luczywek. The Co-Principal Investigators of the project are Julian Betts, Professor, Department of Economics at UCSD and Executive Director of the San Diego Education Research Alliance (sandera.ucsd.edu) and Eli Berman Professor, Department of Economics at UCSD..  

December 1, 2021 through December 31, 2025

Contact Information

For additional information, please contact

Julian Betts, Department of Economics, UC San Diego (jbetts@ucsd.edu),

Eli Berman, Department of Economics, UC San Diego at elib@ucsd.edu,

or Project Director Beata Luczywek at Beata bluczywe@ucsd.edu

 

For more information on SanDERA, please see sandera.ucsd.edu.  For more information on the Department of Economics at UCSD please see economics.ucsd.edu.