Testimony for the New York State Joint Legislative Budget Hearing on Taxes, 2022-23
New York State is a leader when it comes to providing tax credits to families with children, the Empire State Child Credit being a prime example of the state’s initiative in this area. The state established the Empire State Child Credit in 2006 to complement the federal Child Tax Credit, and no other state had such a credit at the time. There are, however, substantial gaps in coverage left by the Empire State Child Credit:
It does not reach all children in families with low incomes.
Children under age four are entirely ineligible.
Black and Latino children are disproportionately ineligible for the full credit.
These gaps compromise the credit’s anti-poverty impacts and mean that children in poverty are not realizing the same income gains associated with the credit as their higher-income peers.
This testimony highlights the existing research on the role that increases in income play in improving child well-being, particularly for younger children and those in poverty (i.e., those currently ineligible for full credit). We also demonstrate how reforming the state credit by decoupling it from earnings, expanding eligibility to children under age four, and increasing credit levels would enable it to benefit these populations and reduce the state’s child poverty rate. Lastly, we show how the benefits of such an expansion would far outweigh the costs through long-run improvements in children’s health and future earnings, decreases in spending on the criminal justice system, and several other benefits.
Overall, our testimony shows how the well-designed reforms to the Empire State Child Credit highlighted above would:
Address the unequal coverage and inequities produced by the credit’s current design, allowing it to reach the more than 1 million children currently left behind.
Meaningfully reduce the child poverty rate and play a key role in meeting the state’s goal to cut child poverty by half in the next ten years, reducing the child poverty rate by 40% when paired with the expanded federal Child Tax Credit.
Make good economic sense given its benefits to New York State as a whole.