Cities Could Slash Child Poverty With Tax Credits, Analysis Finds
After Congress allowed the expanded Child Tax Credit to lapse at the end of 2021, more than a dozen states have implemented their own Child Tax Credits. A new report by the Center on Poverty and Social Policy at Columbia University and the Institute on Taxation and Economic Policy (ITEP) uses data from 14 cities to show how local Child Tax Credits could augment federal and state efforts to reduce child poverty by as much as 50 percent. Spotlight spoke recently with Kamolika Das, one of the authors of the study and the local policy director at ITEP, about the new analysis. The transcript of that conversation has been lightly edited for length and clarity.
Just by way of background, this is something that Share Our Strength helped get launched?
Yes, it’s a joint effort with Columbia University’s Center on Poverty and Social Policy and we got some support from Share Our Strength.
How did you choose the 14 cities?
I think initially we were thinking that we just wanted to select the largest cities by population while maintaining some geographic diversity and not repeating any states. But then as we went along, we kind of realized that we had to make sure that the cities had sufficient data on income and poverty using the American Community Survey from the Census bureau, which includes poverty status measured using the supplemental poverty measure. That eliminated some cities we were initially looking at because the sample size was insufficient and the poverty rates didn’t benchmark well against other data sources. We just wanted to really pick cities where we felt confident about the poverty data and also make sure that the boundaries of all the cities could be reconciled with census data.
So, you used the supplemental poverty rate?
Yes.
And I guess you ran the numbers under two different scenarios, with tax credits of $1,000 and $4,000?
Those were the general targets, yes, but each of the credit amounts differed by city. We started by measuring what child poverty looked like before any child tax credits and then measured child poverty after the existing federal and state credits to establish a current law baseline. And then we looked at two different policy targets—reducing child poverty by 25% and reducing it by 50% compared to the baseline before credits.
The Columbia team designed the hypothetical local credits two different ways. There was the more universal style, where the credit phases out at higher incomes, and then others were targeted for lower-income families. We wanted to really give cities different options. We also included the extra 20% young child bonus for kids under six, which we felt was really important just because there’s so much data out there about how early childhood is the most critical stage for brain development.
And how would you outline the key findings? If I’m understanding the toplines correctly, with the exception of Los Angeles and Oakland, a base credit of $1,000 or less would be sufficient to reduce child poverty by 25 percent across the other cities in the study. And with a local Child Tax Credit of $4,000 per child or less, 12 of 14 localities could cut child poverty by 50 percent through the combined effects of federal, state, and local credits. In seven of the cities, the same reduction could be achieved with a credit of $3,000 per child or less.
That’s correct, though all those scenarios refer to the credit amounts for children aged 6-17, not children under 6. For children under 6, the costs are a bit higher. These numbers are also based on the more universal design that phases out at higher incomes (the credit amounts would be lower for the more targeted design). Those key findings also refer to the scenario in which we think of the local credit as supplementing the poverty reduction that federal and state credits already achieve. The credit amounts would be higher in a scenario in which local credits alone would reduce the poverty baseline after federal and state credits.
And was the delivery method the same in all the scenarios you looked at?
We didn’t really go too much into how it would be administered or anything like that.
It sounds like your hope is that this would be a resource for cities who are considering doing this and they can look at how you’ve modeled scenario A, scenario B, scenario C, etc. Is that correct?
Correct. And that’s why there’s so many different options there, because we recognize that every city has very different resources and we just wanted to put out as many possibilities as possible. And just to be clear, if there are city officials who are interested in this, we’re happy to explore whether we can do the same analysis for them. We can’t promise that because it really depends on how sufficient the data is out there. But it’s definitely something we are hoping to do.
As your executive summary notes, this is now a very hot topic at the state level. Yeah. Are there cities who are considering doing this? Or have you had cities reach out since the report came out?
We’ve had very preliminary conversations, but I don’t know of any cities that are really doing this. In D.C., they enacted it but they didn’t end up funding it. (Editor’s note: On Tuesday, the D.C. Council approved as amended B26-0457, which would establish a child tax credit, among other policies.)
Was there an average cost for the various options? Or did it vary so much that there really wasn’t an average?
It really varied a lot. We thought about publishing a percentage of government revenues. but we just realized that everybody measures that so differently that it just wouldn’t be consistent.
The other point I would make is I just think the timing is obviously so critical right now for considering these sorts of policies, given that the federal government has been retreating from a lot of these anti-poverty measures. We know that local governments for a long time have been laboratories of innovation and it makes sense for them to step up. Another factor, though this isn’t true of every city on our list, but the vast majority of them have child poverty rates that are higher than their respective state averages
The design really matters, and the costs really differ, but if you’re in a city in a state that already has a state CTC, it just really feels like common sense to explore a local child tax credit. It is a pretty significant investment but this is something that has proved to be effective.