State Child Tax Credits Have Enormous Potential to Cut Child Poverty
news releaseCONTACT: Jon Whiten
New state-by-state data charts a course for how states can make headway for the next generation
As the dust settles on this year’s elections and state lawmakers look toward 2023’s legislative sessions, they should consider creating or improving their state Child Tax Credits. A new report released today by the Institute on Taxation and Economic Policy (ITEP) and the Center on Poverty & Social Policy (CPSP) at Columbia University on behalf of Share Our Strength details options for each state plus D.C. on how to use CTCs to dramatically reduce child poverty and counteract the regressive nature of nearly all state and local tax systems.
State CTCs are gaining steam after the federal expansion of the credit was shown to be enormously successful in reducing child poverty, cutting it by more than 40 percent in 2021. Heading into 2023, ten states currently have some form of a Child Tax Credit and many others are considering one. This report also outlines key policy design principles that will help lawmakers, advocates and other stakeholders understand how to reduce poverty through well-designed, effective and inclusive state CTCs.
“As we’ve seen at the federal level, a robust CTC is extremely effective in helping families struggling to put food on the table, pay their bills and make ends meet,” said Aidan Davis, ITEP’s State Policy Director and a co-author of the report. “State lawmakers can enact or expand these credits to chip away at racial and wealth inequality, blunt some of the regressivity of state and local tax systems and help families meet their basic needs.”
Extending the federal policy would provide the broadest poverty reduction across the country, but states can also play an important role in building on the success of the credit.
This new report presents state Child Tax Credit options that would reduce state child poverty rates by 25 or 50 percent. For both 25 and 50 percent poverty reduction, it shows options for a more universal CTC (that extends higher up the income scale and is available to more middle-class families) and a more targeted CTC (that is designed to direct benefits primarily toward families experiencing periods of low income). It finds that:
- In almost all states, a refundable state Child Tax Credit of $2,000 or less – with a 20 percent credit boost for young children under 6 – would achieve a 25 percent reduction (or more) in the child poverty rate.
- To cut child poverty rates by half, the majority of states would require a base credit value of between $3,000 and $4,500 per child plus a 20 percent boost for young children.
“In 2021, state and local governments saw how the federal CTC expansion improved the lives of their constituents by bolstering family income and reducing poverty, food insecurity, and financial hardship,” said Sophie Collyer, CPSP Research Director and a co-author of the report. “This report shows that state governments have an opportunity to achieve the same outcomes by establishing robust and thoughtfully-designed state CTCs.”
Child Tax Credits have enormous benefits for states, with great potential to significantly reduce child poverty in all states while also addressing economic and racial inequities that are too often made worse by regressive state taxation. Well-designed CTCs boost the after-tax incomes and economic security of a diverse group of families and can be particularly important for Black, Hispanic, Indigenous, and other people of color confronting the economic hardships created by systemic racism.
“The 2021 federal enhancements to the Child Tax Credit had a measurable and significant impact on child poverty,” said Lillian Singh, Senior Vice President at Share Our Strength. “Expanding these credits is too important of an opportunity to miss. This new report underscores the critical chance states have to build momentum for state CTCs so more families have the resources they need and the ability to chart a pathway out of poverty.”
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The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan tax policy organization that conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect both public revenues and people of various levels of income and wealth.
The Center on Poverty and Social Policy at the Columbia School of Social Work produces cutting-edge research to advance our understanding of poverty and the role of social policy in reducing poverty and promoting opportunity, economic security, and individual and family wellbeing. The center’s work focuses on poverty and social policy issues in New York City and the United States.
At Share Our Strength, we’re ending hunger and poverty – in the United States and abroad. Through proven, effective campaigns like No Kid Hungry and Cooking Matters, we connect people who care to ideas that work.