Most Common Child Tax Credit Purchase? Food

First round of monthly payments may have notably lowered food insecurity

Young girl and mother feed each other french fries.
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The most common use for the first round of monthly child tax credit payments was food, according to a new Census Bureau survey, with the funds also often going toward utility bills, buying clothing and school supplies, paying down debt, and saving.

Key Takeaways

  • As part of an overhaul of the federal child tax credit program, about 35 million families received payments of up to $300 per child on July 15.
  • Of those that received the credit, almost half surveyed by the Census Bureau said they used the funds to buy food. Paying utility bills was the next most common answer, followed by buying clothes and paying down debt.
  • The share of survey respondents with children that did not have enough to eat declined to 8.4% from 11%, surveys before and after the first payment showed. There was almost no change in households without children.

On July 15 about 35 million families received payments of up to $300 per child from the federal government as part of an overhaul of the 2021 child tax credit. Among household recipients surveyed by the Census Bureau July 21 through Aug. 2, 47% said they mostly spent the funds to buy food, data released Wednesday showed. 

Paying gas, electric, and cable bills was the next most common answer, at 28%, followed by buying clothing (25%), paying down credit card, student loans, or other debt (19%), saving or investing (19%), and paying for school books and supplies (16%). Respondents could pick more than one answer.

Interestingly, all household recipients of the tax credit were not only asked how they spent the funds, but also whether they mostly spent, saved, or paid off debt with the money. For this question, only one answer could be given. Forty percent chose debt, 32% chose saved, 27% chose spent, and 1% didn’t specify.

Food Insecurity Declines

The child tax credit may be linked to a decline in food insecurity, the Census Bureau said, noting that the percentage of families with children reporting a hard time putting food on the table declined to 8.4% from 11% since the July payment, while there was no change in households without children during the same period. President Joe Biden has touted the child tax credit as a “giant step toward ending child poverty in America,” designed to give working class families “a little bit of breathing room.”

While more data is needed to provide a fuller picture, the fact that the group with children experienced a decline while the other group didn’t “strongly indicates” the child tax credit was responsible for the improvement, said Claire Zippel, a senior research analyst at the Center for Budget and Policy Priorities, a research institute. The decline translates to 2.6 million households that didn’t have enough to eat before the child tax credit, but do now, she said.

“We expected to see some decline in food hardship,” Zippel said. “It’s not something that we tried to predict the magnitude of, but, unscientifically, I was surprised it was so dramatic.”

The child tax credit itself isn’t new, with eligible households previously able to claim up to $2,000 per child each year when filing their income taxes. But the American Rescue Plan, a $1.9 trillion pandemic relief bill passed in March, made significant changes for 2021. The maximum credit is $3,600 per child and half of it is being distributed in monthly payments through December. More people are also eligible for more money, with payments reaching lower-income families who previously had not qualified for all (or in some cases any) of the credit because they didn’t earn enough. 

Biden has proposed extending the expansion through 2025, and the budget resolution unveiled in the Senate this week included the groundwork to provide that extension.

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