Child allowances are a winning investment
The United States does not currently guarantee income support universally to families with children, despite income being an important driver of children’s wellbeing and eventual long-term success. Research finds that cash and near-cash benefits increase children’s health, education, and future earnings while also decreasing costs with respect to health, child protection, and criminal justice.
We find that child allowances are a winning investment in our children’s future mobility. While the initial costs may appear large, they are small compared to the very large monetary benefits that would eventually accrue to recipients and society from investing in children. The value to society that flows from these impacts is approximately ten times the annual costs: converting the Child Tax Credit to a child allowance would cost about $100 billion and would generate about $1 trillion, or about $10 for every dollar spent in benefits to society.
The Benefits and Costs of a U.S. Child Allowance
Garfinkel, Irwin, Laurel Sariscsany, Elizabeth Ananat, Sophie M. Collyer, Robert Paul Hartley, Buyi Wang, and Christopher Wimer. 2022. The benefits and costs of a U.S. child allowance. Journal of Benefit-Cost Analysis, 1-28.
doi: 10.1017/bca.2022.15
In this article, we conducted a benefit-cost allowance and produced core estimates on the benefits and costs per child and per adult of increasing household income by $1000, which can be used for any cash or near-cash program that increases household income. We then applied these estimates to three child allowance proposals, with the main proposal converting the $2000 Child Tax Credit in the federal income tax code into a fully refundable and more generous child allowance of $3600 per child ages 0–5 and $3000 per child ages 6–17, as enacted for 1 year in the American Rescue Plan. Our estimates indicate that making the $2000 Child Tax Credit fully refundable and increasing benefits to $3000/$3600 would cost $97 billion per year and generate social benefits of $929 billion per year. Our baseline estimates suggest that making the Child Tax Credit fully refundable and increasing its generosity is a remarkably good investment.