As the dust settles on the midterm elections and state lawmakers look toward 2023’s legislative sessions, anti-poverty advocates say they should consider creating or improving their state Child Tax Credits.
A report by the Institute on Taxation and Economic Policy and the Center on Poverty and Social Policy at Columbia University details state options on how to use Child Tax Credits to dramatically reduce child poverty.
The report 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 Child Tax Credits.
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.
Heading into 2023, ten states currently have some form of a Child Tax Credit and many others are considering one.
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.
Residents that received monthly checks as part of the American Rescue Plan’s expansion of the child tax credit, say the near-universal cash benefit for parents to cut child poverty by a third in New Jersey.
For decades, politicians whittled away cash aid programs and required low-wage work in exchange government help, but now progressive Democrat Lisa McCormick is asking the Legislature to make the cash-based assistance program permanent.
Peter Chen, senior policy analyst at New Jersey Policy Perspective, said more than 1.6 million children in New Jersey benefited from the temporary extension, including 560,000 children who previously didn’t qualify for the full credit.
McCormick said an estimated 82% of New Jersey children were eligible for the benefit but the expansion ended December 31, 2021, leaving families to struggle with rapid inflation without any financial help from the government.
McCormick said a credit of $4,400 for children aged 18 and under and $5,280 for kids under 6 years of age, would have an estimated cost of $6.4 billion.
“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.”
“The Children’s Defense Fund envisions a nation where marginalized children flourish, leaders prioritize their well-being, and communities wield the power to ensure they thrive. Enacting and implementing the provisions of the American Family Act will be important steps toward achieving that vision,” said the Rev. Dr. Starsky Wilson, president of the Children’s Defense Fund. “Ending child poverty in America is a moral obligation that we must pursue with urgency to improve child well-being and address racial injustice.”
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.”