The Benefits and Costs of a Child Allowance

• Published in: Journal of benefit-cost analysis 2022-01, Vol.13 (3), p.335-362
• Main Authors: Garfinkel, Irwin, Sariscsany, Laurel, Ananat, Elizabeth, Collyer, Sophie, Hartley, Robert P., Wang, Buyi, Wimer, Christopher
• Format: Article
• Language: English
• Subjects: Beneficiaries; Child poverty; Cost analysis; Cost benefit analysis; Discount rates; Earnings; Educational attainment; Estimates; Expenditures; Families & family life; Family income; Income; Income taxes; Literature reviews; Low income groups; Parents & parenting; Proposals; Sensitivity analysis; Society; Tax credits; Taxation
• ISSN: 2194-5888; 2152-2812
• DOI: 10.1017/bca.2022.15

This article conducts a benefit-cost analysis of a child allowance. Through a systematic literature review of the highest quality evidence on the causal effects of cash and near-cash transfers, this article produces 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.