Red states pushed child tax credits this year, but the broadest plans fizzled

Children and teachers from the KU Kids Deanwood Child Care Center complete a mural in celebration of the launch of the child tax credit in 2021 in Washington, D.C. Local child tax credits began finding favor in conservative legislatures this year, though several proposals did not advance. (Photo by Jemal Countess/Getty Images for Community Change)

Earlier this year, some conservative states began to embrace child tax credits that put cash directly into the hands of families raising children.

Long favored by liberals, child tax credits can help ease the financial burdens of parenthood and have been shown to slash childhood poverty rates.

But despite initial optimism from sponsors and child welfare advocates, Republican proposals in Indiana and Ohio did not advance this year. Had either measure passed, it would have been the first refundable child tax credit approved in a conservative state.

“The result has been more talk than action,” said Aidan Davis, state policy director at the left-leaning Institute on Taxation and Economic Policy, which has tracked the issue.

Despite the Indiana and Ohio rejections, Georgia did approve a new $250 annual tax credit this year, and Utah expanded eligibility for the state’s existing child tax credit program. But both of those are nonrefundable credits, meaning they do not aid the lowest-income families, who earn too little to owe income taxes.

Refundable tax credits provide money directly to families: While parents must still file tax returns, refundable credits give parents funds even if they earn too little to owe income tax.

“When child tax credits are refundable, they boost the incomes of families with children and can provide a little financial breathing room — which goes a long way in creating a healthy environment for kids to grow up,” Davis told Stateline.

Still, Davis said movement in states such as Utah and Georgia does mark important progress, especially if lawmakers are willing to reassess the details of the programs, namely whether to make the credit refundable.

“It’s a step forward in those states, but there are much more effective ways to design those policies to best support children and families,” she said.

Georgia’s child tax credit was a priority of Lt. Gov. Burt Jones, now a Republican candidate for governor, as part of a wider effort on child care affordability. Jones framed the child tax credit and an expanded child care tax credit as means of boosting the workforce and reducing costs for families.

In Utah, lawmakers expanded the state’s child tax credit as part of a wider tax cut package. Republican state Rep. Mark Strong argued expanding the program would help families and societies.

“We’d also love to encourage young families to have children,” he said, according to the Deseret News.

Setbacks

Early this year, Ohio Republican Gov. Mike DeWine proposed a refundable tax credit worth up to $1,000 per child up to age 6, to be paid for by an increase in tobacco taxes. When introducing the idea, DeWine said the concept was bipartisan, “not a liberal or a conservative proposal.”

But the state House stripped the proposal from the budget. In June, advocates pushed a conference committee to reinstate the measure, but there was little appetite in the GOP-dominated chambers.

“Other than the governor, at least among the legislature, I haven’t heard anybody who was interested in bringing the idea back,” Republican state House Speaker Matt Huffman said, according to The Statehouse News Bureau.

House leaders previously said they were skeptical of any proposed tax increases this session — including the governor’s plan to pay for the child tax credit through higher cigarette taxes.

In June, Huffman said he was more focused on delivering low taxes to Ohioans across the board and questioned the impact a $1,000 tax credit would have on families.

“I don’t think it’s a tremendous tax break to many Ohioans,” he said.

Lawmakers sent their final budget to the governor without the tax credit — but did include tax cuts for wealthy Ohioans and hundreds of millions of dollars for a new Cleveland Browns stadium. DeWine signed the budget bill July 1.

In Indiana, a plan to give a $500 refundable tax credit to families with an infant sailed through the state Senate.

The measure’s Republican sponsor, state Sen. Greg Walker, told Stateline in March he hoped the bill might prove a first step in creating a broader child tax credit program.

“I think it’s — pardon the pun — a baby step to introduce a credit for a newborn,” he said. “I don’t think anyone disputes … all the costs associated with bringing a new baby into the world.”

The bill received unanimous approval from a Senate committee and passed through the upper chamber without any opposing votes. But the measure did not advance beyond a state House committee.

In a recent statement to Stateline, Walker said he would not reintroduce the proposal next year because 2026 is not a budget cycle year for the legislature.

“There is little traction for changing tax law to reduce state receipts without a corresponding reduction in allocations,” his statement said.

Growing interest

State interest in creating or expanding child tax credits boomed after the pandemic-era expansion of the federal child tax credit delivered cash directly to millions.

That move quickly lifted millions of children out of poverty, according to research from Columbia University’s Center on Poverty and Social Policy.

But the expanded tax credit expired in 2021 — leading to a doubling in the nation’s childhood poverty rate in 2022.

Before the pandemic, only New York and California had refundable child tax credits. Since then, 10 more liberal-leaning states and the District of Columbia have implemented such policies, according to the Center on Poverty and Social Policy.

Researchers there found state programs can reduce childhood poverty and boost household incomes if the tax credits are fully refundable, provide at least $1,000 per child and are available to families with children across all ages and wide income ranges.

In Colorado and Minnesota — states with robust programs — child tax credits can help fill some of the void left by the end of the temporary federal expansion, said Ryan Vinh, a research analyst at the center.

Still, states don’t possess the same level of resources that the federal government has at its disposal to move the needle on childhood poverty, Vinh noted. And those resources will be further stretched with looming federal funding cuts to food assistance, Medicaid and other programs that were a part of July’s major tax and spending law.

Some state child tax credit programs are not permanent and are dependent on available funding, he said. For example, Washington, D.C., nixed funding of its $420 child tax credit this year because of budgetary concerns. And Georgia lawmakers are discussing complete elimination of the state income tax, further eroding the benefit of the new tax credit, he said.

“As states are increasingly facing these different budget shortfalls as a result of this new federal bill, they’re going to be forced to make tough decisions,” Vinh said.

Stateline reporter Kevin Hardy can be reached at [email protected].