Spending Response to the Expanded Child Tax Credit: An Analysis Using United States Consumer Expenditure Survey Data

ABSTRACT The American Rescue Plan Act of 2021 substantially expanded the Child Tax Credit (CTC). Early studies documented that the expanded CTC reduced poverty and food insufficiency, but there is little research on its impact on household spending, particularly child‐related spending. We use data from the Consumer Expenditure Interview Survey and a difference‐in‐difference design to examine whether the expanded CTC increased spending overall, in major categories, and on specific items related to children's education and development. Our findings indicate that households used the CTC payments to enhance the well‐being of both their children and the entire household. For each $100 of CTC payment, our models show that households spent $44, mainly on housing ($28) and food ($12). When examining child‐related spending specifically—which overlaps with broader spending categories—households spent $16 per $100. We also find that the increase in child‐related spending was larger for Asian‐, Black‐, and Hispanic‐headed households than for White‐headed households.