Testimony on the DC Child Tax Credit

January 24, 2024
Testimony
Person Testifying: Rachel Metz
Title: Data and Research Manager, DC Action
Testimony Heard By: Committee on Business and Economic Development
Topic of Testimony: DC Child Tax Credit

Testimony of Kimberly Perry, Executive Director of DC Action
Delivered by Rachel Metz, DC Action Research and Data Manager
In support of B25-190 and other Child Tax Credit Policies
DC Council Committee on Business and Economic Development 

January 24, 2024

Good afternoon Chairperson McDuffie, Councilmember Parker, and staff of the Committee on Business and Economic Development. Thank you for the opportunity to address the committee as it deliberates improvements to the DC Child Tax Credit Amendment Act of 2023 (B25-290). My name is Rachel Metz, and I am the Research and Data Manager at DC Action and I am delivering this testimony today on behalf of our executive director, Kim Perry. 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. 

In the District, over one-sixth of all children – 21,000 children in concrete terms – lived in families with incomes below the federal poverty line in 2022. That’s about $23,000 for a family of three in 2022. Approximately 9 out of 10 of these children and families are Black. Income inequality and child poverty are inextricably linked with racial justice in the District.

The median income for white, non-Hispanic households with children in the District is estimated to be $280,000 as of 2022, the highest of any racial group in any state. That compares to $62,300 for Black households with children in the District. With persistent disparities like these, it should be easy to understand the Urban Institute’s 2021 estimate that the District would be one of the greatest beneficiaries of Black child poverty reduction from the federal Child Tax Credit expansion. In fact, the federal CTC increases provided during the pandemic actually did ease or lift poverty for an estimated 25,000 DC children.

DC Action strongly supports the Council adopting a local child tax credit policy to continue this important progress toward disrupting cycles of poverty in the District. We know putting cash directly into the hands of families who earn low incomes means they are better situated to stay housed, afford utility bills, send kids to school in clean clothes, and pay off debts. We know that as many as 89% of Black families in the District used their federal CTC payments, at least in part, for food. This is an important reflection of the disproportionate impact of food insecurity on Black families in the District.  

There are many benefits of keeping more cash in the pockets of lower-income and working families, impacts that will have positive ripple effects across the District. For example, University of Washington researchers 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. 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 by 6% of a standard deviation, which in turn increases students’ probability of college attendance and increased earnings as adults. Simply put, when families have financial stability their children are better able to thrive.  

To maximize the benefits of a local child tax credit, DC Action urges the committee to make the following improvements:

  • The policy must be able to reach the roughly 5,725 children in the District whose families do not need to file taxes because their incomes are so low (based on 2021 and 2022 estimates from the IRS). Over half of those households are in just five zip codes – 20002, 20011, 20019, 20020, 20032 – all in wards 4, 5, 7, and 8. Even families who do not owe taxes must still be supported in filing taxes in order to benefit from a variety of local and federal tax credit cash assistance programs. The Council must require the Office of Tax and Revenue to do robust outreach to the District’s lowest income families – including through partnership with the Department of Human Services – to make a CTC policy inclusive and accessible.    

  • At a minimum, the Council should adopt a local Child Tax Credit of at least $1,500 per child, with no cap on the number of children eligible. To cut District child poverty in half, according to the Institute on Taxation and Economic Policy, we would need a $3,400 credit for children ages 6 and up (and $4,080 for younger children). By lowering the income eligibility for these tax credits, the District could create a more targeted benefit that allows our lowest income families to get more money per child.

  • Fund the child tax credit with an equitable source of revenue. Instituting a local child tax credit cannot come at the expense of other core cash assistance or human services programs that are intended to lift up the same population of residents. DC Action calls on the DC Council to raise the revenue necessary to make a bold investment in a local CTC. For example, the Tax Revision Commission estimated that a 1% increase in the capital gains tax could generate over $40 million per year. A 3% rate raise on DC millionaires who hold significant assets in capital gains could potentially fund a very bold child tax credit.    

Eliminating child poverty in the District should be a top priority for the Mayor and Council. We urge this committee to swiftly mark up and fund a version of the DC Child Tax Credit Amendment Act of 2023 that can significantly and permanently reduce DC’s racialized economic disparities. Thank you and I would be happy to answer any questions.