Testimony of Rachel Metz, Data and Research Manager, Committee on Business and Economic Development

Good morning Chairperson McDuffie and staff of the Committee on Business and Economic Development. Thank you for the opportunity to address the committee today on Fiscal Year 2026 matters pertaining to the Office of the Chief Financial Officer. Specifically, my testimony focuses on the Child Tax Credit, the Earned Income Tax Credit, the Child Wealth Building Act (aka baby bonds), and creating a more resilient tax base to sustain critical investments in children, youth, and families. My name is Rachel Metz, and I am the Research and Data Manager at DC Action. DC Action uses research, data, coalition building, advocacy, and a racial equity lens to break down barriers that stand in the way of all kids reaching their full potential. We are also the home of DC KIDS COUNT, an online resource that tracks key indicators of child and youth well-being.

We recognize the District is facing a daunting financial outlook, with the elimination of federal government jobs and Congress poised to slash the nation’s social safety net to fund tax cuts for the wealthiest. As we weather the financial downturn uniquely impacting the District and the larger national attack on poor and middle class families, it is concerning to see a local budget proposal that plays into the false promise of trickle down economics and undercuts investments in children and families proven to reduce racial and economic disparities while growing the economy from the bottom up.  

The Child Tax Credit that the District passed was modeled on the success of the federal expansion of the Child Tax Credit during the COVID public health emergency. That effort resulted in at least a 30% drop in child poverty rates, and reduced food insecurity and other hardships among children. It prompted child poverty in the United States to drop to its lowest level on record and, notably, in DC, the pandemic era CTC lifted or eased poverty for an estimated 25,000 District children. We know most families used the federal expanded tax credit payments to cover routine expenses such as housing, utilities, clothing, and food as well as to save for emergencies and pay off debt, not just benefitting families but also putting the money right back into the economy. While modest and having room for improvement, the DC Child Tax Credit passed last year and set to go into effect for the upcoming tax year (capturing the current calendar year) would similarly put money in the pockets of families and local businesses struggling to afford to stay in the District. We hope this committee will work across the Council to restore the helpful assistance Child Tax Credits can offer DC’s kids and families. We also urge you to protect the Earned Income Tax Credit in this budget plan as an essential complement to the Child Tax Credit. Both promote child wellbeing and are necessary to spur economic growth from the bottom up.    

The impact of the 2021 increase is consistent with longstanding research on the benefits of keeping more cash in the pockets of lower-income and working families. A team of researchers at Harvard and the National Bureau of Economic Research found that a $1,000 increase in tax credits raises students’ test scores, which in turn increases students’ probability of college attendance and increased earnings as adults. Further, researchers with the University of Washington Center for Studies in Demography and Ecology found that, for each additional $1,000 of a per-child EITC or CTC refund, the state saw a 5% decline in reports to child welfare authorities in the five weeks following the payments. They also found that youth reported fewer physical fights – and fewer criminal convictions during adolescence – after families received higher Earned Income Tax Credit Benefits, theorizing that reduced household economic stress yields reductions in family conflict and helps youth stay out of trouble outside the home, and more family resources for afterschool and summer programs helped youth stay safe and positively engaged. Investing in families who are struggling now results in young people with a more solid foundation for entering adulthood and the District’s economy.

Similarly, the Baby Bonds program is an investment in the next generation. To recap for anyone less familiar with the program, it calls for funds to be put into savings when a child is born into a low-income family in the District and as they grow. Once an eligible child turns 18, they can use the funds for education, starting or investing in a business, buying a home in the District, or saving for retirement. DC Action’s recently released State of Youth Homelessness in the District of Columbia report highlights how the District’s unaffordable housing market and unique barriers to housing for youth are a root cause of the District’s high number (~10,000) of housing insecure or homeless youth. Baby Bonds is part of the solution – it will take both short and long-term policy innovations to disrupt cycles of poverty and counter structural racism. We are disappointed the Mayor’s budget once again zeroes out the Baby Bonds program. Even worse, it sweeps funds that have already been put into trusts, actively divesting from the future of District children. While it can be tempting to respond to a lean budget by no longer making long-term investments, doing so is short-sighted. We hope this committee will work across the Council to make sure the District’s children receive the investments they deserve.

Putting the District on a path to growth, recovery, resiliency, and equity requires the District to diversify our tax base and make sure everyone is paying their share so that everyone – not just those at the top – has the opportunity to thrive in the District. That is why DC Action strongly supports the Just Recovery Coalition’s All in For DC platform which includes policies such as instituting a business activity tax and capital gains reforms to close loopholes in our tax code and get ahead of the likely federal windfall the wealthiest individuals and business operators in the District will receive in the coming months. This committee should use our FY26 budget to proactively help the District recoup any forthcoming federal tax relief that will come at the expense of our most vulnerable children and families.

Finally, this committee should reject budget giveaways to billionaires and stadiums that will not meaningfully uplift working families. DC Action opposes committing District taxpayers to a $1.1 billion giveaway over several years, especially when, at the same time, tax dollars are being rescinded from key social safety net programs such as the Child Tax Credit, Baby Bonds, TANF, Medicaid, Alliance, paid family and medical leave, ERAP, homeless services and vouchers, and so much more. The stadium is only estimated to generate $26 million a year in tax revenue once construction is over, consistent with research that public subsidies for stadiums tend to be poor investments. While forecasted economic output may be better than the tax revenue number, that output estimate becomes far less rosy once you omit the ticket sales, parking, concessions, etc. that the mayor’s deal would let the team owners retain rather than returning to benefit the District. Public deals must truly benefit the public, especially when we are facing such tough times ahead…and we know there is no better investment than in the next generation. 

Thank you for your time.