New evidence on child tax credits at the federal level has shown “stunning” results in lifting children out of poverty throughout the country and a state-level policy could continue that momentum, benefiting a broad range of families, panelists said in a February 8 webinar.
Sen. Danielle Conrad introduced what would be Nebraska’s first state-level credit in LB 294. It would send hardworking Nebraska families a refundable $1,000 tax credit per child under 18, phasing out for married couples filing jointly making more than $110,000. The goal, she said, was to address what she heard as the main concern among her constituents: people “working hard but finding themselves increasingly under water,” struggling to afford childcare and other necessities. A child tax credit would be a broad-based, flexible mechanism to help families afford the rising costs of raising children.
The federal child tax credit has been shown to be effective at helping families meet their needs, said Megan Curran, Policy Director at the Columbia University Center on Poverty and Social Policy. Just within the first month of the expanded federal child tax credit, which began in 2021, three million children were lifted out of poverty. By the time the expanded credit ended, child poverty in the United States had been cut in half, with 90% of that result directly attributable to the federal credit.
A key to the success of the expanded credit, Curran said, was its full refundability. Studies showed the credit allowed families to increase spending on groceries, housing and utilities, children’s clothing and education costs, she said. This resulted in lowered food insecurity among families and reduced reliance on payday lending to meet short term financial needs.
Aidan Davis, State Policy Director at the Institute on Taxation and Economic Policy, said at least a dozen states throughout the U.S. – both red and blue – have taken note of these results and are considering either adopting new state-level child tax credits or bolstering their existing programs. Davis also discussed a recent report which highlighted best practices for states as they look to design their own child tax credits.
Things like full refundability, per child benefits, income phase outs and indexing to inflation are important, she said. The child tax credit proposal in Nebraska meets these requirements, which helps target them to families who’ve been hit by rising costs and are looking to participate fully in the economy.
This is the case in Montana, said Rose Bender, Director of Research at the Montana Budget and Policy Center, where the Republican governor included a state-level credit in the current budget proposal. It also would be a fully refundable credit, intentionally targeted at low-income families with kids under six years old. Like Nebraska, Montana has a budget surplus this year, Bender said.
More information on Nebraska’s proposed credit can be found in our new policy brief outlining the impact similar credits have had.
