How Do State Child Tax Credits Affect Employment and Poverty?

This paper projects the employment, poverty, and fiscal effects of introducing unconditional child allowances in states lacking such programs. We use survey data to identify eligible parents, calculate the policy's change to their work incentives, and predict behavioral responses using labor supply elasticities estimated from recent state-level reforms. Our microsimulation suggests that a $1,000 per-child credit phasing out at $50,000 would reduce poverty among children under age six by 6.3 percent and lead 0.6 percent of working parents with young children to exit employment at an annual cost of $11 billion.