Minnesota can shrink childhood poverty by creating a child tax credit

February 15, 2023 8:00 am

Photo via U.S. Census Bureau.

Powerful… dramatic… unprecedented… those are a few of the words used to describe the impact of the expanded federal Child Tax Credit (CTC) that kept an estimated 2.9 million children out of poverty in 2021. 

Millions of kids across the U.S. had nutritious breakfasts to start their day, warm clothes to wear to school, and comfy beds to snuggle into. 

Those were the types of spending priorities — food, clothing, rent and other essential bills — among families who received the expanded federal CTC. Through the American Rescue Plan, federal policymakers increased the amount of tax credit that families received, and made essential policy changes so that the most struggling families could receive the full value of the credit. 

Recent Census data show that from 2020 to 2021 alone, child poverty fell a remarkable 46% in the U.S. The expanded federal CTC was one of the contributing factors to a sharp decline in child poverty even in the midst of the COVID-19 pandemic, and the impact of the credit was especially strong for children of color and families in rural areas. 

Unfortunately, Congress failed to make the federal CTC expansions permanent, and returned to a situation in which struggling families are left out.

But Minnesota can restart this stalled momentum and become one of a growing number of states to create their own child tax credits. 

This year, the Minnesota Budget Project has joined with partners — including Children’s Defense Fund–Minnesota, Legal Services Advocacy Project and the Minnesota Catholic Conference — to pursue a state child tax credit to reduce the short- and long-term harm of poverty, and help dismantle Minnesota’s deep racial, income and geographic disparities.

We are advocating for a permanent, income-targeted, inclusive Minnesota child tax credit that: 

  • Is fully refundable, ensuring the lowest-income families receive the full credit;
  • requires no minimum earnings to qualify for the full value of the credit; 
  • provides a set dollar amount for each child, with a larger credit amount for younger children;
  • includes families with members who use an Individual Taxpayer Identification Number (ITIN) for tax purposes; and
  • works towards providing the credit in periodic installments. 

The Institute on Taxation and Economic Policy estimates that a child tax credit of $1,080 for children under age six and $900 for older children would reduce child poverty in Minnesota by 25%. 

We are thrilled that Gov. Tim Walz has proposed a powerful child tax credit that incorporates most of our design principles and would make a substantial dent in child poverty, and that the Legislature is considering child tax credit legislation as well.

The documented success of the expanded federal Child Tax Credit demonstrates the huge potential that a Minnesota child tax credit could have for reducing poverty and racial, income and geographic disparities, and improving family budgets and the lifetime prospects of one of the state’s most important resources: our children. 

Minnesota policymakers should get it done this year. Then we can look forward to seeing the words “powerful,” “dramatic,” and “unprecedented” making it into Minnesota news headlines later this spring.

The Minnesota Budget Project is a nonpartisan research and advocacy organization that works on policy solutions that expand opportunity and economic well-being to all Minnesotans. It is an initiative of the Minnesota Council of Nonprofits.

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