New data analysis from the Columbia University Center on Poverty & Social Policy (CPSP) and the Institute on Taxation and Economic Policy (ITEP) indicates that a state Child Tax Credit in Nebraska could contribute to reductions in child poverty rates. This analysis was featured in a joint report recently issued by the organizations.

Using data from the Current Population Survey and a microsimulation tax model, the report found that a refundable state Child Tax Credit (CTC) of $2,800 with a 20% credit boost for children under 6 could lift 24,000 children out of poverty in Nebraska. This would reduce the state’s child poverty rate by 50%.

Modeling also indicates that a smaller $1,000 refundable CTC – with the same credit boost for young children – could reduce the state child poverty rate by 25% and lift 12,000 children out of poverty, the report showed.

For both 25% and 50% poverty reductions, the report examines Nebraska options for more broad-based CTCs that extend higher up the income scale and more targeted CTCs designed to direct benefits primarily toward families with lower incomes.

Modeling in Nebraska found that:

  • A refundable state CTC of $2,800 – the one that would cut the state’s child poverty rate in half – would benefit between 219,000 and 389,000 Nebraska children – or 52% and 92% of all kids, depending on the specifics of the credit.
  • A refundable state CTC of $1,000 – the one that would cut the state’s child poverty rate by 25% – would benefit between 184,000 and 336,000 Nebraska children – or 44% and 80% of all kids, depending on the specifics of the credit.
  • The state cost of CTCs discussed in the report ranged from $186 million to $1 billion.

State CTCs have become more popular after an expansion of the federal CTC was shown to reduce child poverty by more than 40% in 2021.[1] Ten states currently have some type of a CTC and several other states are considering creating CTCs.

The report also notes that CTCs can help states address economic and racial inequities that are too often made worse by regressive state taxation. Well-designed CTCs boost after-tax incomes and economic security for a diverse group of families and can be particularly important for Black, Hispanic, Indigenous and People of Color, the report found.

[1] U.S. Census Bureau, “Expansions to Child Tax Credit Contributed to 46% Decline in Child Poverty Since 2020,” accessed at https://www.census.gov/library/stories/2022/09/record-drop-in-child-poverty.html on Nov. 16, 2022.