In 2021, a quiet revolution in child poverty policy took place in the United States.
A provision in the American Rescue Plan expanded the federal child tax credit by increasing the maximum amount of the credit and making all families, even those with small amounts of income, to claim the credit. This led to over $100 billion being funneled to low-income households with children and millions of children lifted out of poverty.
The expanded child tax credit died in late 2021 when Senator Joe Manchin declined to continue the program, publicly worrying about the cost of the program and privately worrying poor families would use the money from it to pay for “drugs.”
Reducing child poverty is a priority for policymakers for a number of reasons. While many still find ways to blame adults for their poverty, they often have a harder time justifying poverty for children. On top of this, investing in children has broader economic benefits. A study in Social Work Research estimated that child poverty costs the United States $1 trillion a year (about 5% of gross domestic product) in economic productivity, increased health and crime costs, and increased costs as a result of child homelessness and maltreatment.
Reducing child poverty has been a priority for developed countries across the world over the past decade. Canada’s 2016 expansion of its Child Benefit cash program has been credited with lifting nearly half a million Canadian children from poverty. Poland’s “Family 500+” cash transfer program has led to substantial reductions in child poverty.
What would it look like if the United States tried to end child poverty? How much would such a program cost?
The 2019 Roadmap to Reduce Child Poverty produced by a consensus team from the National Academies of Science, Engineering, and Medicine had strategies ranging from an $8.7 billion package of work supports that would reduce child poverty by 19% to a $110 billion universal supports package that would cut child poverty in half.
But what would it cost to end child poverty altogether?
According to responses to the American Community Survey, 11 million children in the United States were living in households with incomes below the federal poverty level in 2024. Eight million of these children were age five to 17 and three million were below age five.
Let’s say we paid out a poverty threshold income to each household in poverty based on the number of children in the household. This would cost about $16,000 per child per year (about $1,300 per month), totaling about $180 billion per year.
Strangely enough, this number is only $70 billion more than the National Academies’s proposal to cut child poverty in half. This is surprising–reducing the first case of child poverty is usually cheaper than reducing the next case of child poverty, which is usually cheaper than reducing the next one. We see this in the National Academies proposals, where the cheaper work-focused proposal reduces child poverty at about half a billion dollars per percentage point of reduction while the universal supports approach reduces poverty at about $2.2 billion per percentage point reduction.
The generous $1,300 monthly child allowance would reduce child poverty at $1.8 billion per percentage point, more cost effective than the universal supports approach. This is because the universal supports package is made up of earned income tax credit reforms, child care subsidies, a more modest child allowance of $225 per month, a higher minimum wage, and expansion of social safety net provisions to more legal immigrants, all policy interventions that are less targeted than a cash transfer to households with children with income below the federal poverty level.
While $180 billion sounds like a lot of money, there are policy options for providing a benefit like this while keeping the federal budget revenue-neutral.
According to the Committee for a Responsible Federal Budget, replacing the payroll tax with an employee compensation tax that covers all employee compensation including health insurance and stock options would raise $330 billion per year, more than financing such a program. Raising the payroll tax rate by 1% would raise $172 billion per year, nearly enough to cover the entire cost of the benefit.
Repealing the One Big Beautiful Bill tax cuts would raise $640 billion per year, paying for this benefit and a whole lot more along with it. Even just repealing the One Big Beautiful Bill Act tax cuts for income over $400,000 would raise about $250 billion per year, enough to fund the benefit and more.
There are other tax changes that could finance a revenue-neutral or a deficit-reducing child allowance to end child poverty. One would be enacting a 2-3% tax on wealth, which would raise about $350 billion per year. Another option would be to enact a 5% value added tax on goods, excluding goods such as groceries, education, health care, new housing, and financial services. This would raise about $330 billion per year, more than enough to pay for this generous child benefit.
In reality, the minimum dollars needed to end child poverty would be lower than this since most households already have income. My colleague Michael Hartnett used American Community Survey data to estimate that paying each household enough to get over the federal poverty line would cost about $168 billion. If it would cost $168 billion to end overall poverty, then by definition child poverty could be abolished at that cost or lower. Using that data and just looking at households with children, my colleague Michael Hartnett has estimated that ending child poverty would cost about $135 billion. This means that the interventions detailed above or some that are even cheaper than them could end child poverty and be revenue neutral.
There are likely other options to end child poverty, but these calculations show it is possible and within the realms of policy options at the disposal of the federal government. While it is an option, it is ultimately up to Congress and the President to decide if this is a priority.