6

Other COVID-19 Pandemic-Period Policies and Programs and Their Potential Confounding Effects for Assessing Impacts of the EITC and CTC in 2021

Understanding the impacts of the American Rescue Plan Act of 2021 (ARPA) on the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) in 2021 is complicated by the extraordinary social, economic, and policy climate that existed alongside these policies that year. Not only was the United States in the second year of a global COVID-19 pandemic (hereafter, “pandemic”), with its attendant public health and economic consequences for the population, but numerous other policies and programs changed in 2021 along with the EITC and CTC. To understand the effects of the EITC and CTC policies in 2021 on child poverty, their effects need to be understood in the context of the other policies that existed alongside them. It is also important to consider what the impacts of the EITC and CTC policies in 2021 might have been in 2021 had other pandemic-related policies and programs not been in place. This chapter describes other major pandemic-era policies and programs that directly provided resources to households during 2021, and how these policies complicate efforts to assess the relationship between the ARPA EITC and CTC Expansion and child poverty. Main messages from this chapter are highlighted in Box 6-1.

OTHER MAJOR POLICIES IN PLACE IN 2021

The pandemic included a long and varied set of policy responses that proliferated across time, across policy spheres, and across levels of government. A full description of all policy responses that could theoretically have affected poverty rates in 2021 is beyond the scope of this report. For example, public health measures around vaccines and workplace regulations may

have affected work patterns and therefore earnings and income, which can affect poverty rates. Policies that provided tax credits and business loans may have affected jobs and wages and thus impacted poverty. Education policies and school closures may have affected employment and child care decisions, thus impacting incomes and poverty. The list goes on—it is infeasible to catalog every policy that potentially affected incomes and poverty in 2021 alongside the changes to the EITC and CTC policies in 2021. This discussion focuses on the major programs—those funded at levels exceeding $5 billion that directly affected the resources available to U.S. families and households. “Directly” refers to policies and programs that provided direct income support, as opposed to those that altered the wider economic and public health landscape and may thus have changed economic calculations that affect poverty. Priority is given to policies and programs captured in the Transfer Income Model version 3 (TRIM3) estimates calculated by the Urban Institute, as the committee requested that the Urban Institute remove as many of these policies as possible from the baseline poverty estimate in some analyses of the sensitivity of results (see Chapter 8). The committee recognizes that such categorizations are partially subjective, which implies that some excluded policies and programs may also be important. Table 6-1 describes key characteristics of 2021 pandemic-related policies and programs chosen for the committee’s analysis.

Unemployment Insurance Expansions

One of the largest changes involved a set of programs expanding unemployment benefits for those without work during the pandemic. As the pandemic began to spread across the United States in March 2020, many

TABLE 6-1 Key Characteristics of Major COVID-19 Pandemic-Related Policies and Programs

economic sectors contracted rapidly, and many U.S. workers lost their jobs. The unemployment rate spiked to a peak of 14.7% in April 2020, up from 3.5% in February 2020 (Bureau of Labor Statistics, 2020). In response, the government created several pandemic-related expansions to unemployment benefits across a series of bills signed into law in 2020 and 2021 (Bitler et al., 2023; Spadafora, 2023). Three of the largest expansions are highlighted:

• The Federal Pandemic Unemployment Compensation (FPUC) program, which entailed an increase in the size of weekly benefits that workers received. Payments were initially up to $600 per week (through July 2020) and dropped to $300 a week when reinstated in late 2020. These benefits were ended in September 2021, though many states began withdrawing from the program prior to that date.
• The Pandemic Unemployment Assistance (PUA) program, which increased access to unemployment benefits by making certain classes

• of typically ineligible workers eligible for unemployment benefits. These included self-employed workers, gig workers, freelance workers, and independent contractors. The PUA extended through September 2021 unless states withdrew early.
• The Pandemic Emergency Unemployment Compensation (PEUC) program, which increased the duration of benefits that people could claim. Historically, individuals could receive benefits for up to 26 weeks, and the PEUC increased this to 79 weeks. Like the other programs, the PEUC extended through September 2021 unless states opted out early.

Together, these programs were funded at approximately $660 billion¹ and represented a large infusion of income support into U.S. households in 2020 and 2021. As noted above, these payments can alter the estimated effects of the EITC and CTC policies in 2021 on child poverty in both direct and indirect ways. Directly, they could change the poverty baseline against which the EITC and CTC’s effects are measured. Indirectly, they could change the decision-making context around which employment, living arrangements, and program participation may affect poverty.

Economic Impact Payments

The federal government passed three rounds of Economic Impact Payments (EIPs)—known colloquially as stimulus payments or stimulus checks—throughout 2020 and 2021.² The three rounds of payments differed in size and structure but went to households with incomes below specified levels (i.e., $150,000 for joint tax filers, $112,500 for head-of-household filers, and $75,000 for other filers). The first round of payments was made in 2020, and thus those payments are less relevant to understanding the effects of the EITC and CTC policies in 2021 on child poverty. 2020 payments are briefly discussed here, as some U.S. households received retroactive payments for the first EIP in 2021, and the Urban Institute’s model (see Chapter 8) captures these retroactive payments as 2021 income. Those receiving retroactive payments were primarily immigrant tax filers without a Social Security Number, who were initially ineligible for the first payment but then made eligible retroactively. The first EIPs were set at $1,200 for adults and $500 for qualifying children.

The second EIP was authorized late in 2020, with initial direct deposits made on December 29, 2020, and checks mailed on December 30, 2020,

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¹ https://oui.doleta.gov/unemploy/docs/cares_act_funding_state.html

² https://home.treasury.gov/policy-issues/coronavirus/assistance-for-american-families-and-workers/economic-impact-payments

meaning that the income from the second EIP, if sent as a check, was mostly received and available in 2021 rather than 2020.³ Payments were equalized between adults and children at a level of $600 per qualifying individual. All EIPs were based on 2019 income and were targeted at low- and moderate-income tax filers, phasing out as income increased (see Table 6-1). The timing of the second EIP complicates poverty measurement, as poverty is calculated for the calendar year—begging the question of whether these payments should be counted as 2020 or 2021 income, or split across 2020 and 2021. Chapter 8 shows the implications of considering these payments as 2020 or 2021 income, and whether the committee’s estimates are sensitive to that choice.

The third EIP was issued beginning in March 2021, and like the second EIP, provided equally sized payments to qualifying adults and children. This payment was set at $1,400 per person, again phasing out with income. Certain classes of tax filers and tax entities were ineligible for EIPs, including “nonresident aliens,” individuals who could be claimed as dependents on someone else’s taxes, and estates and trusts. As with expanded unemployment benefits, EIPs may affect antipoverty-effect estimates both directly (i.e., by lowering baseline poverty rates) and indirectly (i.e., by affecting recipients’ poverty-relevant financial decision making). Together, the second and third rounds of EIPs cost approximately $550 billion (Parker et al., 2022), most of which entailed direct income payments to U.S. households.

SNAP Emergency Allotments and Benefit Increases

The Supplemental Nutrition Assistance Program (SNAP) provides funds to eligible households for food purchases. SNAP benefits expanded during the pandemic in a variety of ways. First, the Families First Coronavirus Response Act established SNAP emergency allotments, which increased benefits to the maximum allowed, regardless of other household income. Typically, SNAP benefits phase out as household income increases. Emergency allotments eliminated the phase-out and provided the maximum amount each month to all eligible households. The U.S. Department of Agriculture (USDA) approved SNAP emergency allotments for all states and territories with the expanded benefits beginning in March and April 2020.⁴ The USDA revised the program in March 2021 to provide an additional $95 in emergency allotments for the subset of households that were already receiving the maximum SNAP allotment based on their household income and thus did not previously receive an emergency allotment (U.S.

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³ https://fiscaldata.treasury.gov/static-data/published-reports/mts/MonthlyTreasuryStatement_202101.pdf

⁴ https://ers.usda.gov/sites/default/files/_laserfiche/publications/104146/EIB-237.pdf?v=50257

Department of Agriculture, 2021a). In federal fiscal year 2021 (September 2020 to October 2021), the USDA dispersed $37 billion in emergency allotments (see footnote 5). Emergency allotment payments continued through February and March 2023, although some states ended them early, including 10 states that ended the payments across 2021 (Long, 2023). The Committee for a Responsible Federal Budget estimated that increases in SNAP benefits and emergency allotments (not counting the October 2021 change to the Thrifty Food Plan) cost approximately $65 billion across the pandemic.⁵ Another SNAP expansion involved a temporary 15% benefit increase from January 2021 through September 2021 (Jones, 2024). Though not a response to the pandemic, a permanent revision to the Thrifty Food Plan went into effect in October 2021, increasing benefits for SNAP recipients beginning that month.

Pandemic EBT

In addition to labor market changes, the pandemic also led to countrywide school closures. Closures impacted the provision of school meals through the Free and Reduced-Price School Meals Program, which provides free or subsidized school lunches (and sometimes breakfasts) to millions of children across the country. Given that children were not receiving these meals, the government created a new program called Pandemic Electronic Benefit Transfer (P-EBT) to provide families with money, in the form of transfers to their Electronic Benefit Transfer (EBT) cards, to purchase extra food. The program began in the 2019–2020 school year and was reauthorized in 2021 through 2023. The government eventually made a version of the program permanent beginning in 2024, now named Summer EBT. States could choose to participate in the P-EBT program, and benefit levels and disbursement dates varied widely across states in 2021, often driven in part by the number of days students attended school remotely. For the most part, eligibility was tied to participation in the Free and Reduced-Price School Meals Program, but this also varied. In fiscal year 2021 (October 1, 2020, to September 30, 2021), $28.3 billion was spent on the P-EBT program.

Child and Dependent Care Tax Credit

In addition to changes to the EITC and CTC, a third tax credit changed in 2021: the Child and Dependent Care Tax Credit (CDCTC) which, in other years, is a nonrefundable tax credit that can be used to offset expenses incurred while paying for child and dependent care. In 2021, this credit was temporarily increased and made refundable, meaning families whose credit

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⁵ https://www.covidmoneytracker.org/explore-data/interactive-table

exceeded their tax liabilities could claim the difference as part of their tax refund. The CDCTC includes a cap on “maximum allowable expenses” that, in years prior to (and since) 2021, is used to estimate the size of the CDCTC. In 2021, this maximum increased from $3,000 to $8,000. The CDCTC also has an “allowable percentage” used to determine the size of the credit relative to the maximum allowable expenses. This increased from 35% to 50% in 2021. Thus, prior to 2021, the maximum CDCTC would have been 35% of $3,000 (or $1,050), but in 2021, the maximum would have been 50% of $8,000 (or $4,000). Because it was made refundable, more families (typically families with lower incomes) were able to receive the CDCTC through their tax refunds. The total cost of the 2021 CDCTC expansion is estimated at $8 billion (Committee for a Responsible Federal Budget, 2021).

Medicaid Continuous Enrollment and Affordable Care Act Premium Tax Credits

Early in the pandemic, the U.S. government passed legislation allowing for “continuous enrollment” of Medicaid enrollees in exchange for increased federal funding (Corallo et al., 2024; Gordon et al., 2024; Kaiser Family Foundation, 2024). Tax credits to subsidize health insurance coverage were also expanded and made more generous (McDermott et al., 2021). The Medicaid provisions, which also attached requirements that states maintain their pre-pandemic programs’ eligibility and benefit structures, were designed to prevent Medicaid enrollees from losing coverage during the pandemic. These provisions remained in effect until 2023, at which time states could begin “unwinding” their continuous enrollment procedures and renewing or disenrolling Medicaid beneficiaries. However, certain provisions, like the extension of postpartum coverage, were made permanent. For individuals purchasing health insurance coverage through the Affordable Care Act marketplaces, federal premium tax credits were also expanded under ARPA, setting fixed and reduced contribution percentages by family income. For example, for those under 150% of the federal poverty threshold, individual contributions to premiums dropped from 2–3% of the premium cost to zero (Swindle & Giovannelli, 2024). Combined, these two expansions entailed nearly $140 billion in spending in 2021 (see Table 6-1).

Emergency Rental Assistance Program

Both the Response and Relief Act and ARPA provided funds for the Emergency Rental Assistance Program (ERAP), a new form of direct housing assistance provided to renters and landlords. The two rounds of ERAP funding were primarily provided directly to states, for financial assistance

with rent (including arrears), utilities and home energy costs (including arrears), and certain other housing expenses.⁶ Though the federal government provided states with some guidance, states exercised enormous discretion in the implementation, timing, and disbursement of funds. In some cases, funds could go directly to landlords, while in other cases, funds could go directly to tenants. In general, funds were intended to cover the housing costs of renters who experienced (or attested to experiencing) income drops, incurred major housing-related expenses, or experienced various forms of pandemic-related hardship. Most funds were required to go toward direct financial assistance (for up to 18 months total), though some could also be used for housing-related services (e.g., case management, mediation).⁷ In total, about $46 billion was spent across two rounds of the ERAP.

Other Policies and Program Expansions

In addition to the major policies and programs just described, still others could have affected baseline poverty rates in 2021—and can thus complicate the estimation of the antipoverty effects of the EITC and CTC policies in 2021. While the additional policies and programs described in this section are generally smaller than those discussed above, they may still have affected the poverty rate.

During the pandemic, several changes were made to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Low Income Home Energy Assistance Program (LIHEAP), and Temporary Assistance for Needy Families (TANF). WIC, which provides nutrition assistance to pregnant mothers, infants, and young children, became easier to access when states waived in-person requirements for certification and benefit issuance (Bush & Lee, 2021), and benefit levels for fruit and vegetable purchases were also increased (Nitto et al., 2024). LIHEAP funding was increased, and states were given more flexibility to use funds to meet residents’ needs,⁸ including in some cases increasing benefit levels. TANF allowed states more leeway in providing benefits, such as suspending time limits or not counting some income sources when setting benefit levels (Kauff et al., 2023; Shantz et al., 2023). Funding increases to support child care providers also occurred, through both Child Care and Development Block Grants and Child Care Stabilization Grants, though most of these funds went to child care providers to continue providing services during

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⁶ https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-program

⁷ https://nlihc.org/resource/emergency-rental-assistance-program-13-1

⁸ https://liheapch.acf.hhs.gov/content/liheap-covid-19-updates#:~:text=a%20separate%20COVID%2D19%20Disaster,be%20eligible%20for%20up%20to

the pandemic (Watkins et al., 2024). Lastly, federal, state, and local eviction moratoria were instituted during the pandemic,⁹ barring most evictions in cases of rent nonpayment. While these changes to the child care industry and eviction law do not directly factor into 2021 poverty estimates, they do shape the context in which the EITC and CTC policies enacted under ARPA in 2021 affected families and children (Watkins et al., 2024).

Taken together, other policies and programs provided American households with an unprecedented amount of income support and other aid in 2021, precluding a straightforward estimation of the antipoverty effects of the EITC and CTC policies in 2021. Complications arise from direct alterations to the baseline child poverty rate against which the EITC and CTC policies in 2021 are measured, but these policies and programs also altered the overall context of individual and family decision making in myriad ways that may have affected the estimation of income poverty in 2021. Alternative baseline estimates provided by TRIM3, while helpful for understanding how this context alters estimates of antipoverty impact, can ultimately only partially separate other policies’ and programs’ moderating effects on the panel’s key estimates.

THE INFLUENCE OF OTHER PANDEMIC POLICIES WHEN ASSESSING THE IMPACTS OF THE ARPA EITC AND CTC EXPANSIONS IN 2021

The existence of the other major policies described above complicates estimates of the antipoverty impacts of the EITC and CTC policies in 2021. Complications arise from both direct and indirect effects on baseline child poverty rates and through interactions with other policies.

Direct effects of other pandemic policies on the assessment of the impact of the EITC and CTC policies in 2021 on child poverty arise because resources provided by these other policies alter the baseline resources and poverty rate used to assess the antipoverty effects of the EITC and CTC. Consider a family whose total 2021 income before considering resources from government policies is $3,000 below the poverty threshold. If that family receives $4,000 from expanded unemployment benefits and $6,000

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⁹ https://nlihc.org/coronavirus-and-housing-homelessness/national-eviction-moratorium

from the CTC under ARPA, resources from either policy can “lift” the family above the poverty threshold, depending on which income is counted first. When estimating the number of people removed from poverty through an individual government policy, the U.S. Census Bureau’s standard practice is to calculate whether those people were in poverty before counting resources from that specific policy, but after counting resources from all other policies. Under this calculation, unemployment benefits would have already moved this family above the poverty threshold, so this estimation strategy precludes the CTC benefits available under ARPA from potentially “lifting” this family out of poverty.¹⁰ Because much temporary government income support went to U.S. households in 2021 due to the pandemic, this additional support may thus have driven poverty lower than it might normally have been, even in the absence of the EITC and CTC policies in 2021. In essence, there may have been less poverty to reduce due to other pandemic-related policies and programs.

Other policies and programs can also affect estimates of the impact of the EITC and CTC policies in 2021 on poverty indirectly, by altering the context in which individuals and families receive these benefits. A standard example could be a parent’s decision of whether and how much to work in response to the policy environment. The temporary CTC expansion, for example, might not have been large enough on its own to induce a parent to work less/stay home and care for a young child, but in combination with expanded unemployment benefits and an EIP, that calculus might have changed. Such potential indirect effects extend beyond employment decisions. With regular access to expanded unemployment benefits and various other supports, families may have deemed it unnecessary to apply for SNAP benefits, for example, or a parent may have decided whether it was worthwhile to live with another adult in the same household—all of which may change the calculation of poverty. These types of indirect effects remain incompletely understood but are important to keep in mind when interpreting the results in Chapter 8.

Chapter 7 describes the strategy used to remove many—though not all—of these pandemic-related resources from the poverty rate calculation, to directly assess the impact of the EITC and CTC policies in 2021 on child poverty. However, alternative calculations do not account for the indirect effects of these policies and programs.

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¹⁰ Perhaps counterintuitively, the same is true when calculating the antipoverty impact of Unemployment Insurance benefits. In that calculation, the extra resources from the CTC under ARPA in 2021 would have already moved the family above the poverty threshold, precluding Unemployment Insurance from being able to do so.

CONCLUSION

Alongside the EITC and CTC policies in 2021, other major initiatives—such as expanded Unemployment Insurance, EIPs, SNAP emergency allotments, P-EBT, and ERAP—provided substantial direct income support to households in 2021. These supports helped reduce child poverty even before accounting for the EITC and CTC, complicating efforts to isolate the tax credits’ individual impacts. These other policies not only altered the baseline poverty rate but also affected family decision-making contexts, potentially influencing employment, living arrangements, and participation in other assistance programs.

These overlapping supports complicate any estimation of the unique antipoverty effects of the EITC and CTC policies in 2021. While modeling approaches attempt to account for other major programs, they cannot fully separate the direct and indirect effects of the pandemic policy environment. Recognizing these challenges is essential when interpreting the forthcoming analysis of how the EITC and CTC policies in 2021 influenced child poverty.

The next chapter turns to understanding how the EITC and CTC policies in 2021 may have influenced families’ employment decisions. Understanding potential labor supply responses is critical for accurately interpreting the impacts of the tax credits on child poverty, both in 2021 and under future alternative policy scenarios.