(Source: MIRS.news, Published 11/16/2022) A refundable state child tax credit of $3,500, with an extra 20% for kids under six, could cut Michigan’s child poverty rate by half, according to a joint report released by the Institute on Taxation and Economic Policy (ITEP) and Center on Poverty and Social Policy (CPSP) at Columbia University.
It'd also cost $6.1 billion, which is roughly the size of the surplus Michigan has left on the balance sheet from federal COVID money and higher-than-expected state revenue. A more targeted credit is estimated to cost $2.42 billion.
The study, which was developed on behalf of Share Our Strength, a national nonprofit, found the $3,500 credit, with a $4,200 credit for those kids 6 and under, could lift 120,000 children out of poverty in Michigan.
The report also found a smaller credit of $1,500, with the same addition for young children, would reduce the poverty rate by 25% and affect 60,000 children. That one is estimated to cost $2.42 billion. A more targeted credit is estimated to cost $1.6 billion.
As of 2022, 10 states have some form of child tax credit.
And in 2021, states that did adopt a credit saw a more than 40% reduction in child poverty, along with a boost in after-tax incomes for minority groups, said Sophie COLLYER, a CPSP research director and report co-author.
“In 2021, state and local governments saw how the federal CTC expansion improved the lives of their constituents by bolstering family income and reducing poverty, food insecurity and financial hardship,” Collyer said.
Legislators in Michigan should consider adding a child tax credit to their legislative agenda in 2023, said Aidan Davis, state policy director for ITEP and report co-author.
“As we’ve seen at the federal level, a robust CTC is extremely effective in helping families struggling to put food on the table, pay their bills and make ends meet,” Davis said. “State lawmakers can enact or expand these credits to chip away at racial and wealth inequality, blunt some of the regressivity of state and local tax systems and help families meet their basic needs.”
The report provided examples of universal credits that open up options to more middle-class families, as well as more targeted approaches that direct benefits toward lower-income groups.
