One of the biggest myths out there is that tax policy is boring. People hear about it and their eyes glaze over, the accountants are never the exciting people at a party, and something about tax law feels incredibly grown-up and out-of-reach for people to wrap their minds around as something that could be BIG and make a huge impact in the lives of everyday people.
I’m here to disabuse you of that notion. Just as my friends at The Purse have reminded us that mastering personal finance, meal plans and home budgets are both cool and accessible, I’m hoping that you’ll bear with me on a particular tax policy that can change lives, change outcomes and literally end child poverty if we utilize it right.
It’s called the Child Tax Credit.
This might be more familiar to most readers as “the checks that came in 2021,” apropos of nothing but an emergency pandemic, to support families with young children. What poverty scholars have since learned is that making the child tax credit refundable (meaning available to anyone regardless of income) and advanced (arriving ahead of tax season) was that child poverty rates were CUT IN HALF.
HALF.
For children who were living in impoverished conditions, without enough food to eat, these checks were a godsend.
For families like Lauren McNally’s, a state rep in Ohio who I interviewed, these checks meant they could catch up on bills and spend more on groceries. “It helped us pay off some credit cards and helped us with groceries, child care and car payments. Basic things,” she recalled. “We didn’t go on a vacation with it.”
Fast forward a few years, a change in administration, and the tax cuts coming out of Congress are largely designed to favor the wealthy. Even the expanded child tax credit - upping it from $2000 to $2500 per child, has limits on who can access it. Who is left out? The poorest families.
Read: Who Are the Kids and Families Left Out of The New Child Tax Credit?
But state legislatures are where some of the innovative magic happens. That has been true for child care (hello, Vermont and New Mexico and now possibly New York) and will also be true for the child tax credit. State legislators are looking to replicate the anti-poverty success of the child tax credit from 2021.
And not just the usual suspects in blue states. Red states too.
I wrote about states expanding their child tax credits for The 74. Even though these tax credits aren’t as large as the federal ones (and states have an obligation to balance their budgets each year, unlike the federal government which can take on debt), they are still becoming more popular and states are getting savvy about how they are structured.
As one expert said:
“It’s a domino effect,” said Neva Butkus, a senior analyst who leads the state child tax credit work for the Institute on Taxation and Economic Policy. Butkus observed that there are clusters of states that tend to follow one another, such as those based on geography, and that conversations surrounding the child tax credit (CTC) among state lawmakers transcend political affiliation. She points to the CTC in Ohio and one that passed in Georgia as examples of forward momentum in red and purple states. “We are seeing it become more commonplace, and lawmakers across the aisle are seeing the value in the credits, as affordability becomes more of a focus.”
So what does this mean? A few things:
—We know what good policy looks like to solve problems like child poverty, which have dramatic ripple effects for a child’s future life and education. But a generous child tax credit will be good for families, even those like McNally who aren’t hovering at the poverty threshold, but are struggling to raise kids while prices continue to go up and wages stay stagnant.
—States continue to remain the innovators. Absent federal action, look to the states. In this current policy climate which has shifted away from robust social policies, it will be up to individual states to fill the gaps. My own work tends to focus on policy solutions, and for the last year it’s been states, states, states. Localities, too, can make a difference. I’m headed to San Antonio, Texas next week to learn more about their publicly-funded PreK program, paid for by an ⅛ cent sales tax increase, approved by voters.
—One advantage of the state legislators is that many of the people making the policy are much closer to the day-to-day lives of the people who will be impacted by it. I spent the earlier part of my career on Capitol Hill and still retain faith in the public servants who choose to run for public office, but it’s a much different set up when you have a staff, an office, and a slew of benefits and advantages that the everyday people lack. State legislators are often operating on their own, with minimal staff, and low salaries. Many have regular day jobs to pay the bills. It’s not lost on me that these are the legislative bodies who are more attuned to solving for a challenge like poverty and stagnant wages.
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