2023 in Review: Year-End Legislation and New Year Resolutions
Abby Ling
In 2023, notable advancements toward economic equity were ushered in. Despite the absence of expanded federal tax credits for workers and their families, states took the reins to enact and expand local safety net programs, including their Earned Income Tax Credits (EITCs) and Child Tax Credits (CTCs). In particular, the refundability and expanded eligibility of these tax credits remained a focal point in state legislative decisions.
Where States Stepped Up
This past year, policymakers in 13 states enacted or expanded their state EITCs, while 12 states enacted or expanded their state CTCs. Among state legislative sessions, local governments have raised awareness and further increased economic opportunities for:
- Survivors of domestic violence in Washington, where the state expanded its local EITC’s eligibility to individuals using the Married Filing Separately (MFS) status. Under current federal requirements, individuals filing with MFS status cannot claim the federal EITC. States have pushed to change this at the local level. Most recently, Washington’s expansion has provided survivors of domestic violence the ability to access financial relief without having to engage with their partners or return to unsafe living environments, granting them the opportunity to gain financial independence and potential freedom from financial manipulation.
- Immigrant workers and families in Maryland became eligible for the state EITC and CTC following the passage of the Family Prosperity Act. The enactment permanently strengthened the state’s tax credits, expanding the state EITC to 100% of the federal rate and providing families with children up to $500 per child. And, unlike the federal credit, the state CTC was proposed and passed to reach the lowest-income households and children without a Social Security number, providing all Maryland children with the full benefits of both tax credits.
- Children in Massachusetts by expanding the state CTC. The latest tax legislation made the state CTC one of the most generous in the nation, increasing the tax credit’s value from $180 to $310 per dependent for fiscal year 2023, then to $440 per dependent for 2024 and beyond. The expanded benefit will put more money back into the pockets of families with young children, ultimately reducing food insecurity and cost of living expenses.
“Refundable credits are a promising way to secure economic justice, advance racial equity, and help communities of color. They can serve as a lifeline to low- and moderate-income families who face food and housing insecurity, and who generally struggle to make ends meet.” – Institute on Taxation and Economic Policy.
Although states saw notable high points in local tax policies, several states have made unsustainable tax cuts that risk undoing the progress of their tax systems. Significant tax policies underscore the state’s role in supporting workers and their families during economic instability and the unpredictability of federal support. While substantial in their actions and effects, states’ policies cannot overcast the responsibility the federal government has to ensure that necessary aid and resources reach all corners of our country.
The Future of Federal Tax Credits
Once again, Congress finds itself balancing the demands of tax credit advocates pushing to reinstate the expanded 2021 federal Child Tax Credit (CTC) and addressing the calls from corporate lobbyists for business tax breaks. Democratic lawmakers and proponents of the tax credit expansion faced renewed vigor when the U.S. Census Bureau released reports earlier in the year detailing poverty trends in 2022. One of the most upsetting is the reported uptick in child poverty, increasing from 5.2% in 2021 to 12.4% in 2022 as a result of sunsetted pandemic-era policies, including the expanded 2021 federal CTC.
Moving into 2024, it’s up to Congress to decide whether to renew those benefits to support our nation’s children and families or let them fall by the wayside. It’s up to us – as policymakers, advocates, community organizations, and citizens – to lobby for change and ensure Congress meets the essential needs of our communities.