Evidence and the Child Credit | National Review

Evidence and the Child Credit | National Review

Congress expanded the child tax credit as part of last spring’s American Rescue Plan, increasing its generosity and allowing households with no income to receive the full amount of the benefit. Congress also changed the credit so that it would be distributed as a monthly income. These provisions were in place for 2021 and expired with the start of the new year.

The New York Times has a front-page story today on the expiration with the following claim: “Analyses of the data since the new child benefit took effect, however, have found no evidence that it has done much to discourage people from working.”

This claim is (I think) narrowly true so far as it goes. But the NYT should broaden its gaze.

Beyond the narrow question of whether the 2021 expansion of the child tax credit reduced work last year, there is a mountain of evidence that people’s decisions whether or not to work respond to changes in tax policy, including to the generosity and structure of tax credits. When assessing whether a permanent expansion of the child tax credit is likely to affect people’s decisions to work, that broader body of evidence should be considered.

And even if you want to treat 2021 as a case study, not enough time has elapsed to say anything within driving distance of conclusive. The credit was paid out as recently as three weeks ago, and formally expired just days ago. In this case, to borrow the phrase, the absence of evidence is not necessarily evidence of absence.

I would be very surprised if a permanent expansion of the child credit along the lines of what has been supported by Democrats in the Build Back Better framework would not lead to less employment. How much less is a harder question to answer.

That empirical question is a good place to focus the debate — not on whether, but on how much.

Michael R. Strain — Michael R. Strain is the director of economic-policy studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute.

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Tony Beasley
Tony Beasley writes for the Local News, US and the World Section of ANH.