A state child tax credit would improve outcomes for Michigan’s kids and families ⋆
Research has shown that boosting family incomes is a proven tool in ensuring children have the support and resources they need to grow up healthy and strong, which is something that each and every child deserves.
However, too many children are left out of the full federal Child Tax Credit because their families earn too little, and Michigan lawmakers have yet to follow the lead of the growing number of states that have adopted a Child Tax Credit of their own.
The current structure of the federal Child Tax Credit is upside down in that the children who would benefit from it most – those in families who are struggling to make ends meet – often receive less than children growing up in middle-income and high-income households.
State advocates warn that window to expand federal Child Tax Credit is closing
Here in Michigan, more than 1.5 million children receive less than the full federal credit because their parents earn too little, with Black and Hispanic children disproportionately excluded because their parents are overrepresented in low-paid work as a direct result of past and present-day racial discrimination.
Children in rural communities are also more likely to be left out of the full federal credit as rural workers tend to earn less than workers in urban areas. Furthermore, children without a Social Security Number have been completely excluded from receiving the federal credit since 2017.
During the pandemic, we saw what an enhanced Child Tax Credit can do. The American Rescue Plan Act both increased the size of the credit and expanded it to reach children typically left out because their family earns too little, which played an essential role in driving down child poverty rates in 2021.
However, the federal Child Tax Credit expansion and several other pandemic-era safety net expansions have since expired, leading to a Supplemental Poverty Measure child poverty rate that more than doubled in our country over the past year, going from 5.2% in 2021 to 12.4% in 2022, according to the U.S. Census Bureau.
In the wake of Congress’ decision to let the federal Child Tax Credit expansion expire, lawmakers in a growing number of states have looked at the evidence borne out of the historic investments made in families during the pandemic and have rightfully recognized that child poverty is a policy choice we don’t have to accept. In 2023 alone, 10 states have adopted a new child tax credit or expanded an existing credit.
Michigan has policy tools available to significantly reduce child poverty here in the Great Lakes State and follow the lead of the 14 states that have already made a state Child Tax Credit a reality for their youngest residents.
A Child Tax Credit in Michigan would help to strengthen families and ensure Michigan children have the strong foundation they need to do well in school, stay healthy and be successful later in life. And, if designed with equity in mind, it could go a long way in helping to reach more families and mitigate inequities in our existing state tax system.
Michigan lawmakers can ensure that a state Child Tax Credit is equitable by making it fully refundable, so families can receive the full credit even when it exceeds the amount of taxes they owe, and adjusting it annually for inflation, so it doesn’t lose value over time.
Adopting a phase-out for the credit will also ensure families do not see the credit disappear from one year to the next based on changes in income or working hours, and offering simplified filing would help reach families who do not traditionally file taxes. Families with Individual Taxpayer Identification Numbers should also be included in any state credit that is adopted, so that immigrant children who miss out on the federal credit can benefit.
In August, the Michigan League for Public Policy released its 2023 Kids Count in Michigan Data Book & Profiles, which showed a 15% decrease in child poverty in Michigan from 2016 to 2021. But absent permanent policy changes to tackle child poverty, we know these types of gains will not last, and we are already seeing a reversal in the progress made in reducing child poverty now that pandemic-era safety net expansions have ended.
Whether the evident flaws in the current federal Child Tax Credit are addressed in the future or not, it’s time to prioritize the economic security and well-being of children in our state by adopting a permanent, fully refundable state Child Tax Credit that is targeted toward the families and kids who need it most. All Michigan kids deserve a strong start in their lives and this is a policy choice that can ensure that.
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authored by Anne Kuhnen
First published at https%3A%2F%2Fmichiganadvance.com%2F2023%2F12%2F23%2Fcolumn-a-state-child-tax-credit-would-improve-outcomes-for-michigans-kids-and-families%2F