A Robust Local Child Tax Credit Could Help End Child Poverty in the District

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April 12, 2023
Blog Post

By Rachel Metz on April 12, 2023

The 2021 federal Child Tax Credit (CTC) expansion lifted or eased poverty for an estimated 25,000 District children. Nationally, the CTC expansion resulted in at least a 30 percent drop in child poverty rates, and reduced food insecurity and other hardships among children. Despite the fact that this legislation prompted child poverty in the United States to drop to its lowest level on record, Congress let it expire in 2022. However, the District has the opportunity to remedy the situation, at least part way.

Last month, Ward 5 Councilmember Zachary Parker and eight other members of the DC Council introduced legislation, currently referred to the Committee on Business and Economic Development, to create a locally funded child tax credit. The legislation could certainly be more generous – it calls for up to $500 per child rather than the $1,500 recommended by DC Fiscal Policy Center or the $3,400 credit that the Institute on Taxation and Economic Policy estimated would be needed to cut District child poverty in half. But passing and funding this legislation would absolutely be a step, albeit a small one, in the right direction.

The DC Council is completing its budget hearings this week, and will begin to mark up Mayor Bowser’s proposed budget when they return from recess in late April. Tax Day is next week. This is a critical moment to remember that policy makers have the ability to dramatically reduce child and family poverty if they choose.

Income inequality and child poverty are key racial justice issues in the country and in the District. The median income for white (non-Hispanic) families with children in the District is estimated to be $275,200 as of 2021, the highest of any racial group in any state. That compares to $46,800 for Black District families with children and $134,500 for Latinx families with children. As a result of those disparities, roughly 9 out of 10 of the District children in families with incomes below the poverty line are Black. When the 2021 federal child tax credit expansion went into effect, the Urban Institute estimated that the District would have one of the biggest drops in child poverty rates of any state, disproportionately benefiting Black children who face the highest poverty rates.

Fueled in part by the same racist tropes used to influence public opinion on including work requirements in social safety net programs, Republican opponents to the 2021 expansion said that making the credit available to families with incomes too low to owe federal income tax would encourage parents to leave the workforce. That didn’t happen. Instead, most families nationally used the payments to cover routine expenses such as housing, utilities, clothing, and food as well as to save for emergencies and pay off debt. Black families were more likely to spend the benefit to purchase food and essential items, compared with other groups.

That wasn’t just the case nationally but in the District as well. While exact percentages varied from month to month, a far higher percentage of Black District families (vs. white District families) who received a monthly child tax credit payment in 2021 reported spending the money on food, clothing, utilities, or mortgage and rent payments. As many as 89 percent of Black families with a monthly child tax credit payment reported using some of the money for food.

While the Child Tax Credit attempts to help families meet their immediate needs, one innovative attempt to alleviate intergenerational poverty – which disproportionately impacts Black families – in the long term is the baby bonds program. We know that income inequalities snowball into even greater disparities in household wealth, with white District households having 81 times the wealth of Black households and 22 times the wealth of Latino households. Although the baby bonds program is still in early stages, the District is further along than any other state in implementing it. The mayor’s decision to cut it in her budget is a step backward in our efforts to build equitable intergenerational wealth for District residents.

Twenty-nine thousand children in the District live in poverty. A new child tax credit would dramatically reduce that number and make progress toward eliminating child poverty. We know the child tax credit works. We urge the DC Council to prioritize our children by expanding, passing, and funding the proposed legislation. If our leaders truly want to give all District families a fair shot, they need to implement bolder programs to help families meet their basic needs.