The Benefits and Costs of a U.S. Child Allowance
We conduct a benefit-cost analysis of a U.S. child allowance, based on a systematic literature review of the highest quality available causal evidence on the short- and long-term effects of cash and near-cash transfers. We produce 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 apply 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. Aggregate costs and benefits are estimated via micro-simulation.
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. Sensitivity analyses indicate that the results are robust to alternative assumptions and that each of the three child allowance proposals produces a very strong to an extraordinarily strong return for the U.S. population.
Suggested Citation:
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. https://doi.org/10.1017/bca.2022.15