Local Tax Credits Could Significantly Reduce Child Poverty
“Child Tax Credits have been the focus of increased lawmaker attention over the past few years, especially following the dramatic success of the 2021 federal CTC expansion in reducing child poverty and the subsequent resurgence of pre-pandemic child poverty levels. While 15 states now supplement the federal credit with their own Child Tax Credits to better reduce poverty, boost economic security, and invest in children, no cities have yet implemented their own credits. These local Child Tax Credits are a logical next step for local lawmakers looking to deliver meaningful results for their communities.
A new analysis by the Center on Poverty and Social Policy at Columbia University and the Institute on Taxation and Economic Policy, produced with the support of Share Our Strength, focuses on the potential of these credits and finds that local lawmakers could aid in significantly reducing child poverty with relatively modest investments in local Child Tax Credits.
The study focuses on 14 cities (Baltimore, Charlotte, Chicago, Denver, Houston, Jacksonville, Los Angeles, Minneapolis, New York, Oakland, Philadelphia, Phoenix, Seattle, and the District of Columbia) and finds:
- A base Child Tax Credit of $1,000 or less would be sufficient for a 25 percent child poverty reduction (when combined with federal and state credits) in 9 of these 14 cities (in Los Angeles and Oakland it would need to be higher and in 3 of the cities, federal and state credits already reduce child poverty by 25 percent).
- A base credit of approximately $4,000 or less would be sufficient for a 50 percent child poverty reduction in 12 of the 14 cities (in Los Angeles and Oakland it would need to be higher)
- In 10 of these 14 cities, a credit that would reduce child poverty by 25 percent would cost less than 3 percent of the city’s revenues.
- In 8 of the 14 cities, costs for achieving a 50 percent poverty reduction are less than 15 percent of the city’s revenues.
- Local costs for hitting these poverty-reduction targets are much lower for cities in states with robust state Child Tax Credits, such as Minnesota.
- Similarly, the local costs would be markedly lower if the federal Child Tax Credit was expanded as it was in 2021, and if children in lower- and moderate-income families were eligible for the full increased federal credit.”
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