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Study reveals benefits generated by expanded child tax credit

Yahoo Finance’s Denitsa Tsekova joins the Yahoo Finance Live panel to discuss the latest with the Child Tax Credit expansion.

Video Transcript

[MUSIC PLAYING]

ZACK GUZMAN: Welcome back. It's been a few weeks since we've seen families cashing checks that may have come through on that child tax credit. And as more and more people push to talk about it being put into place permanently, a new study is looking at the way that it's already been impacting society and delivering on what it set out to do, and actually delivering a good amount of returns on the costs of delivering those tax credits. And for more on that, Yahoo Finance's Denitsa Tsekova breaks down what exactly the analysis has found. Denitsa?

DENITSA TSEKOVA: Yeah. So we're looking at an analysis by Columbia University that looks at both the short-term and the long-term returns from this investment. As a reminder, the price tag we have for the expansion of the child tax credit is around $100 billion. And the return we're expecting is eight times more, close to eight times more. So this is because the expansion of the child tax credit could actually increase children's safety, future earnings, improved health outcomes, for both children and their parents, and reduce health care costs.

So the biggest boost to society is, really, improved health and longevity of parents and children. Obviously, living longer has monetary benefits to society, and such cash payments are proven to have positive effects on health and longevity. Therefore, they're expected to bring big benefits to society, but this is more of a long-term benefit. Additionally, the expanded credit will lead to an increase in future earnings for the children receiving the credit. There are studies showing that increase of family income in childhood is actually proven to translate into additional future earnings for the child beneficiaries.

As a reminder, the American Rescue Plan, not only increased the CTC amount, allowed half of the credit to be distributed monthly, but it also made the credit fully refundable. So a lot of low-income families are actually getting the payments now.

AKIKO FUJITA: Denitsa.

ZACK GUZMAN: Go ahead, Akiko.

AKIKO FUJITA: Denitsa, what are some of the challenges of getting a high return on that?

DENITSA TSEKOVA: Well, there is one big challenge, really. There are four million children, families of four million children, that the IRS doesn't have information on them. And they won't get the payments automatically. So if we want to get that high return, we have to reach those families. So this is the big challenge. And those families will be the biggest beneficiaries. So going forward, that's where we're looking at, whether those families will get the payments.

ZACK GUZMAN: Denitsa Tsekova, breaking down the latest there on the child tax credit front. Appreciate that.