Child Tax Credit
Locations
- Minnesota Department of Revenue, Minnesota
Focus Area
- Economic Mobility
“The hope is that if you give low-income families direct cash through the tax credit, you will see increases in income, which will decrease poverty and have the potential to have a positive impact on things like housing stability, financial security, and the health and well-being of both the parent and the children.”
The Issue
Child poverty is a persistent challenge in the United States. It creates serious implications for economic mobility, health, and long-term well-being. In 2023, the Supplemental Poverty Measure child poverty rate rose to 13.7 percent, an increase of 1.3 percentage points from the prior year. Evidence from recent federal policy interventions suggests that income support can substantially reduce this hardship. The U.S. Census Bureau estimates that the federal Child Tax Credit lifted approximately 2.4 million individuals above the poverty line.
Despite growing evidence that direct cash transfers can reduce poverty, less is known about how income supports translate into improvements in specific outcomes such as housing stability, child safety, health, and financial security, particularly when delivered through state-level tax systems. Policymakers need rigorous, causal evidence to understand whether these programs produce short-term emergency relief, foster long-term stability, or both.
The Intervention
The Minnesota Department of Revenue (MN DOR) believes that providing lower-income families with a child tax credit will increase disposable income for essential needs, thereby improving financial security, housing stability, health, academic outcomes, and overall family well-being. In 2023, Minnesota enacted a new Child Tax Credit (CTC) that provides families with up to $1,750 a year per qualifying child. The credit has no income threshold, no cap on the number of eligible children, and allows families to receive advance monthly payments. Unlike most state or federal credits, Minnesota’s CTC extends eligibility to families filing with an Individual Taxpayer Identification Number (ITIN), ensuring access for many households with limited earnings. As one of the most comprehensive state-level income support programs in the country, the policy is designed to provide predictable, flexible support that helps families meet essential needs and promotes long-term stability and well-being.
The partnership between the Minnesota Department of Revenue (MN DOR) and LEO is designed to address this evidence gap. MN DOR brings rich administrative tax data and expertise in program implementation, while LEO contributes extensive experience in causal evaluation and longitudinal data linkage. Together, they will integrate tax records with administrative data on health, education, housing, and welfare to assess the mechanisms through which income support affects family and child outcomes. The findings will provide Minnesota policymakers with actionable insights into the role of income support in promoting family stability, reducing hardship, and improving child well-being. This, and will inform broader national discussions on child tax credit policy and economic mobility.
Research Question
-
What are the short-term effects of the Minnesota Child Tax Credit on emergency indicators such as homelessness, child maltreatment, and maternal and infant health?
-
How does the CTC influence long-term family stability, including employment, housing, credit, and debt outcomes?
-
How does the advance payment option affect family agency compared with traditional tax credit structures?
Intended Outcomes
LEO and MN DOR are partnering to analyze the causal effect of the Child Tax Credit on the well-being of families. Specific outcomes of interest for this project fall into two categories: (1) short-term emergency relief and (2) long-term stability. Short-term outcomes of interest include homelessness, child maltreatment cases, criminal incidents, credit scores, and maternal and infant health. Long-term stability outcomes of interest include stable housing, employment, taxable income, debt, and home ownership.
Research Study Design
LEO plans to evaluate the impact of the Minnesota Child Tax Credit through a quasi-experimental study that includes approximately 450,000 children claimed through the tax credit this year. LEO’s research team will receive administrative records from the Minnesota Department of Revenue and link these data to other sources, such as Experian data and housing court records. Using the Department of Revenue data, the research team will identify a plausible comparison group of households that were eligible for the tax credit but did not file taxes.
By comparing outcomes for households that received the Child Tax Credit with those that were eligible but did not receive it, LEO will be able to isolate the effect of the credit on outcomes of interest. The results from this study will help the state of Minnesota better understand the impact of the Child Tax Credit and will inform broader discussions about child tax credit policy.