Do State-Level Child Tax Credits Reduce Material Hardship?

Background

Since the expiration of the 2021 American Rescue Plan Act (ARPA) expansion of the federal Child Tax Credit (CTC), there has been rapid growth in state-level CTC adoption and expansion. As of 2025, 12 states and the District of Columbia offer refundable CTCs. Most of these credits are fully refundable, meaning benefits reach families regardless of labor income or state tax liability. This stands in contrast to the federal CTC, which remains only partially refundable and therefore contingent on positive earnings. Yet state CTCs are far from uniform. They differ in benefit levels, phase-in and phase-out rates, income eligibility thresholds, and whether eligibility is restricted to families with young children (Vinh et al., 2025). This heterogeneity generates meaningful variation in the size and accessibility of benefits across states, depending on families’ income, number and age of children. Such policy-driven variation offers a valuable empirical opportunity to examine whether additional income reduces material hardship among households with children.

Methods

Our analysis draws on biweekly Household Pulse Survey data from 2023–2024, focusing on households with at least one child under 18 across three hardship dimensions: food, expenses, and housing. We exploit policy variation generated by six states that newly implemented a state CTC in tax year 2023, with refunds delivered during the 2024 tax season, whose benefit levels and eligibility rules differ across states. Identification leverages a simulated instrument (SI) that isolates policy-driven variation in CTC generosity from households' own behavioral responses. We construct the SI by applying each state's statutory rules to a fixed 2019 CPS-ASEC sample, computing eligible benefits by state and year, and collapsing to state–year–education–family size cells. Merged onto the Pulse sample, these simulated benefits serve as a continuous treatment in a triple-difference design — exploiting variation across years (2023 vs. 2024), tax-season exposure (February–April vs. non–tax season), and benefit generosity — to isolate the causal effect of CTC receipt on material hardship.

Results

Simulated CTC benefits vary substantially across states and by the presence of children under age 6. Among households with young children, Minnesota offers the most generous average benefit ($2,241), followed by Vermont ($1,230), while Maryland provides the least ($150). Preliminary results suggest that state CTCs are associated with reduced food hardship among households with children.

Conclusion and implications

Our preliminary findings that state Child Tax Credits reduce food hardship among households with children are consistent with evidence from studies of the ARPA-expanded federal CTC, which show that the 2021 monthly payments reduced food insufficiency (Parolin et al., 2023; Pikauskas et al., 2024). As the expanded federal CTC was not extended beyond 2021, and a return to full refundability at the national level appears unlikely in the foreseeable future, state-level credits have emerged as a critical source of support for families with children. Our study provides timely evidence for the growing number of states considering CTC adoption, suggesting that fully refundable credits have the potential to reduce material hardship.