Impact of the expanded child tax credit and its expiration on adult psychological well-being

Abstract

The COVID-19 pandemic has exacerbated stress and psychological distress among adults with children, with certain populations experiencing a greater mental health burden. The expanded Child Tax Credit (CTC) under the 2021 American Rescue Plan Act provided temporary relief to families with children through monthly payments from July through December 2021, offering a unique opportunity to examine the impact of a near-universal cash transfer on adult psychological well-being in the United States. We use the Household Pulse Survey Waves 28-41 (April 14, 2021 to January 10, 2022) to analyze the CTC expansion and Waves 34-42 (July 21, 2021 to February 7, 2022) to examine the expiration of the expanded CTC to investigate the effects of the expanded CTC and its expiration on psychological distress of adults in households with children and its differential effects by gender, education, marital status, and race and ethnicity (N = 167,772). We employ a difference-in-difference methodology by leveraging the policy-induced variation in the additional credits that households are eligible for. Our results indicate that the expanded CTC led to a significant reduction in the percentage of having at least mild symptoms of psychological distress in the overall sample, especially among female, single, married, and Hispanic adults. No significant effects were found on the rate of moderate or severe psychological distress symptoms, suggesting that more severe forms of psychological distress may require more comprehensive and long-term interventions. We find that more adults experienced moderate to severe psychological distress after the monthly CTC payments ended. We discuss the role of the expanded CTC in buffering mental health crises during the pandemic and the implications of the heterogeneous policy effects by subgroups.

Keywords: Anxiety; Caregiver psychological well-being; Cash transfers; Child allowance; Child tax credit; Depression; Difference-in-Difference; Mental health.