New Poverty Center Report Calls on States to Take Action on Child Tax Credits

April 18, 2019 @ 9:08 pm

The new report co-authored with the Institute on Taxation and Economic Policy shows how state-level Child Tax Credits could substantially reduce child poverty in all 50 states and D.C.

As of 2017, the child poverty rate in the United States stood at more than 15 percent, with 11.5 million children in poverty. The federal Child Tax Credit (CTC) provides up to $2,000 per child, but is inaccessible to the poorest families and therefore largely ineffective at reducing poverty. A new report from the Columbia Center on Poverty and Social Policy and the Institute on Taxation and Economic Policy—featured this week in a Vox article titled “Democrats don’t have to wait for Trump to leave office to cut child poverty”—proposes augmenting the credit with state-level CTCs, which could reduce child poverty by up to 60 percent.

The Case for Extending State-Level Child Tax Credits to Those Left Out: A 50-State Analysis,” published this month, argues that it is both feasible and relatively affordable for states to supplement the CTC and lift millions out of poverty. The report’s authors examined two different funding levels for doing so, both of which would “top off” the federal CTC for those who do not receive the full credit. By supplementing the federal CTC to ensure a credit of $2,000 per child for the poorest families, states could reduce their child poverty levels between 12 and 36 percent, depending on the state. Ensuring a credit of $3,000 per child six years and over ($3,600 for kids under six) would result in reductions ranging from 33 to 60 percent.

As Dylan Matthews notes in his Vox article, that latter, higher credit has already been proposed at the federal level in legislation introduced by Democrats in both houses of Congress. However, with a Republican-majority in the Senate and a Republican in the White House, that legislation is unlikely to become law in the foreseeable future. This opposition at the federal level increases the utility of such mechanisms in the states, where Democrats control both the legislature and governorship in 14 states plus Washington, DC, comprising more than one-third of the country’s population.

The costs of implementing such programs would be significant, but the benefits would be myriad. “There’s a wealth of psychological and economic evidence suggesting positive long-term impacts of giving cash to families with kids,” Matthews writes. In addition to increased economic activity—which would more than cover the cost of the credits over time—guaranteed child credits for needy families would boost poor children’s lifetime earnings and improve education and health outcomes. Furthermore, whereas the current federal CTC disproportionately benefits Whites, the report found that state-level CTCs would reduce poverty among Hispanic and black Americans at nearly identical rates to white Americans.

So how likely is it that states will implement these credits? The political climate in many states precludes the passage of such legislation, as fiscally conservative leaders tend to balk at such expenditures. However, Matthews highlights several states where the credits aren’t only politically palatable, but are perhaps on their way to becoming reality. California’s Department of Social Services proposed a plan to end child poverty that relies heavily on a targeted CTC, which has made its way into Governor Gavin Newsom’s most recent budget proposal. If the policy proves successful, that may encourage other states to follow suit.

You can read the report in its entirety here.

Dylan Matthews’ Vox article is available here.