[These two efforts build on the success of the federal Child Tax
Credit in reducing child poverty and improving outcomes for children
in the near and long term and are important tools for advancing
equity.]
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MOMENTUM FOR NEW AND EXPANDED STATE CHILD TAX CREDITS, EARNED INCOME
TAX CREDITS CONTINUED IN 2023  
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Samantha Waxman, Amelia Minkin
August 1, 2023
Center on Budget and Policy Priorities
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_ These two efforts build on the success of the federal Child Tax
Credit in reducing child poverty and improving outcomes for children
in the near and long term and are important tools for advancing
equity. _

, CBPP

 

2023 legislative sessions saw strong momentum
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creating and expanding child tax credits. Three states created a new
permanent child tax credit, one created a one-time child tax credit
payment, and seven states improved existing child tax credits. These
efforts build on the success of the federal Child Tax Credit
in reducing child poverty and improving outcomes for children
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the near and long term.

Many states this year have also improved their earned income tax
credits (EITCs). State EITCs, like the federal EITC, boost incomes for
people paid low wages and provide greater support for people caring
for children, helping them better make ends meet and thrive in the
long run, research has found
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Because people of color, women, and people who immigrated to the U.S.
are overrepresented in low-paid work and in families with little to no
earnings, these two state credits are important tools for advancing
equity.

In total, 18 states established or improved either a child tax credit
or EITC this year. Those states include:

* COLORADO, which made its child tax credit fully available
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families earning little to no income. The child tax credit is now
worth up to $1,200 per child under age 6. The state also expanded its
state EITC from 25 to 38 percent of the federal EITC.
* MARYLAND, which increased the income limit
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families to receive the child tax credit and made all children under
age 6 eligible. The state also made previous EITC expansions permanent
and enabled people not claiming children on a tax return to receive
the full credit value.
* MINNESOTA, which established a permanent, refundable child tax
credit
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increased the size of its Working Family Credit, as its state EITC is
known. The new child tax credit will be worth up to $1,750 for each
qualifying dependent under age 18, the highest of any state’s child
credit to date.
* NEW JERSEY, which expanded its existing child tax credit
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doubling the credit available for families with incomes of up to
$80,000 to a maximum credit of $1,000 per child.
* OREGON, whose legislature passed a new refundable child tax
credit
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up to $1,000 per dependent under age 6. Governor Tina Kotek is
expected to sign the bill.

States are also thoughtfully implementing measures that move toward
providing people tax credit payments throughout the year, rather than
in one lump sum at tax time. The American Rescue Plan recognized this
need
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flexibility by temporarily authorizing monthly payments of its
expanded federal Child Tax Credit, which reduced financial stress and
boosted families’ ability to meet their monthly budgets.

At the state level, more frequent tax credit payments could affect
recipients’ eligibility for other types of public assistance. For
example, in the past the U.S. Department of Agriculture has counted
state periodic payments of refundable tax credits as income for the
Supplemental Nutrition Assistance Program (SNAP), which could reduce
the amount of support people receive from that program.

States offering multiple payments should plan carefully to avoid this
outcome and should create a comprehensive outreach plan to notify
credit recipients of potential impacts. For example, Vermont’s child
tax credit and Oregon’s (when enacted) will both give recipients an
option to receive the credit over multiple payments, though the states
won’t begin disbursing on that schedule unless the federal
government clarifies that these payments won’t affect other types of
public assistance people receive. Minnesota’s new child tax credit
law gives the state Department of Revenue an option to design an
advance payment process. All three states provide the flexibility for
people to choose to receive one or multiple payments, a necessary
element.

Most state tax systems ask the most [[link removed]] as a
share of income from families earning the least. Strong and
well-designed child tax credits and earned income tax credits can make
state tax codes fairer and more equitable while helping families
afford the basics and address everyday financial challenges.

_MODERATOR -- READ MORE: ECONOMY REMAINS RESILIENT AT MID-YEAR
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BY CHAD STONE, CENTER ON BUDGET AND POLICY PRIORITIES, AUGUST 3, 2023_

SAMANTHA WAXMAN is Deputy Director of State Policy Research on the
State Fiscal Policy team. In this role, she leads a team of analysts
and conducts research on a range of tax policies designed to make
state tax codes more equitable and fairer, including refundable
credits and wealth taxes.

Prior to joining the Center, she served as a policy fellow in a
congressional office. She holds a master’s degree in Social Policy
from the University of Pennsylvania’s School of Social Policy &
Practice and a bachelor’s degree in English and Classics from
Bowdoin College.

AMELIA MINKIN is a State Fiscal Policy Intern

About THE CENTER ON BUDGET AND POLICY PRIORITIES:

We are a nonpartisan research and policy institute that advances
federal and state policies to help build a nation where everyone —
regardless of income, race, ethnicity, sexual orientation, gender
identity, ZIP code, immigration status, or disability status — has
the resources they need to thrive and share in the nation’s
prosperity.

We combine rigorous research and analysis, strategic communications,
and effective advocacy to shape debates and affect policy, both
nationally and in states.

We work closely with a broad set of national, state, and community
organizations to design and advance policies that promote economic
justice; improve health; broaden opportunity in areas like housing,
health care, employment, and education; and lower structural barriers
for people of color and others in communities that continue to face
systemic barriers to opportunity.

We promote federal and state policies that will build a stronger, more
equitable nation and fair tax policies that can support these gains
over the long term. We also show the harmful impacts of policies and
proposals that would deepen poverty, widen disparities, and worsen
health outcomes.

We work on policy implementation at the federal, state, and local
levels to maximize the positive impact of policies and bring the
lessons learned on the ground back to the policymaking process in
Washington, D.C. and state capitals.

Our work — rooted in sound research and original data analysis,
informed by our extensive knowledge of policy and how programs operate
on the ground, and strengthened by our collaboration with a broad
range of partners — is trusted by a wide range of researchers,
policymakers, and media.

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