Debating Expansions to New York’s Child Tax Credits: Two Legislative Approaches

Izzy Rassel

The New York State Senate and New York State Assembly have proposed different ways to allocate $500 million of the state’s budget to strengthen local tax credits for low- and middle-income families with children. While both Republicans and Democrats are eager to provide solutions to tackling child poverty, Democratic Governor Kathy Hochul’s recent budget proposal did not include expansions of family tax credits, making funding for expansion the most significant hurdle. Both chambers outlined enhancements to the state’s tax credits, but each approach varies in structure and beneficiaries.

The Assembly’s Plan: Businesses and Families

The Republican-led State Assembly has proposed the Affordable Blueprint for Child Care Plan (ABC Plan) to help cover childcare costs for working families and provide childcare providers $250 million in tax breaks. For low-income families, the plan includes a bill that will expand the current Empire State Child Credit to provide recipients up to 45% of what they receive from the federal Child Tax Credit (CTC), which provides taxpayers with up to $2,000 in refundable tax credits per child. Currently, the Empire State Child Credit includes qualifying children under four years of age and gives families who claimed the federal CTC 33% of the portion of the federal CTC or $100 multiplied by the number of qualifying children. Members of the Assembly say the new ABC Plan will provide nearly $300 million in extra money for families to use for childcare or other home needs. Moreover, the ABC plan would include Individual Taxpayer Identification Number (ITIN) filers in the Earned Income Tax Credit (EITC), which will benefit the many people ineligible for tax credits due to mixed-status families filing with an ITIN.

The State Senate’s Approach: Replacing the Tax Credit

In the New York State Senate, Democrats are advocating to replace the state’s Empire State Child Credit with the higher Working Families Tax Credit. The Working Families Tax Credit would grant $550 per child to single taxpayers who make under $75,000 annually, or married couples earning under $130,000 per year. This credit will gradually taper off by $20 for each $1,000 of additional income over the set thresholds. The Assembly’s $500 million proposal boosts the work done by existing Empire State Child and Earned Income credits but expands eligibility to thousands more people by eliminating gaps like capping the number of children who get the benefit. The program will take over five years to be fully phased in. Brooklyn-based Democratic Senator Andrew Gounardes is sponsoring the legislation to create the new credit that can help lift low-income families out of poverty.

The Senate provision will afford the state’s poorest families hundreds more dollars per child, bringing an estimated 26,000 kids out of poverty and an additional 8,000 kids out of “deep poverty,” according to researchers with the Center on Poverty and Social Policy at Columbia University.

Democratic Representative Ritchie Torres notes that “the Child Tax Credit is to families with children what Social Security has long been to senior citizens: It is a powerful safety net for the most vulnerable people in our society.”

An expanded tax credit gives economically burdened workers and families the resources needed to pay for basic needs like food, rent, utilities, and child care.

New York has the fifth highest rate of child poverty in the nation, according to the state Office of Temporary and Disability Assistance, and one in five kids in the state live in poverty. New York has also lost 1,300 child care providers since the COVID-19 pandemic. Alongside this loss, families are paying some of the highest rates in the nation for spots in the existing programs. Both statistics underscore the pressing need for practical solutions to confront child poverty and childcare obstacles in New York, which includes updating the State Tax Credit program that was originally launched in 1997.

Looking Ahead

The push for an improved tax credit for families is seen as a bipartisan effort and the current legislation session marks the first time the Working Families Tax Credit, or versions of it, were included in the budget priorities for both legislative chambers.

“Instead of pitting these two priorities against each other,” said Samantha Waxman, deputy director of state policy research at the Center on Budget and Policy Priorities, “New York should raise revenue from wealthy people and profitable corporations to fund them both, and there’s no shortage of good ideas on how to do that.

An updated New York CTC is a critical step in addressing child poverty, but there is still substantial room for the state to pursue policies that will advance tax code equity and provide long-term support for workers and families.