State Child Tax Credits Are a Crucial Lever for Equity

As we enter a new Presidential administration, the health and well-being of low-income families hangs in the balance. Many of the policies that offer economic security to the most vulnerable families in the country are being subjected to overhaul, renegotiation, and retrenchment. In this context, Child Tax Credit (CTC) policy is crucial. The CTC is a tax benefit that helps offset the cost of raising children. Even within a trajectory of growing partisan conflict, the CTC has maintained bipartisan support for more than two decades, becoming an important part of the US social safety net and lifting millions of families out of poverty each year. A striking expansion of the CTC happened in 2021, when the American Rescue Plan Act temporarily increased the amount of the tax credit, extended the number of families eligible for it, and made it easier for families to receive benefits. These changes helped 62 million children and drove poverty to a record low. The CTC expansion also advanced racial equity, reducing Black and Latinx child poverty rates by 6.3 percentage points and lifting 716,000 Black children and 1.2 million Latinx children above the poverty line (in addition to 820,000 White, non-Hispanic children and 110,000 Asian children).

Despite these successes, Congress did not make the pandemic expansion permanent, and in the face of federal equivocation, many states took steps to implement their own child tax credit programs. But states designed these programs in remarkably different ways. Key features of state CTC legislation—inclusivity, generosity, and ease of use—diverge dramatically across the country. This heterogeneity has marked implications for whether and how much state CTCs help those who need them most. All low-income families suffer when state CTC policies create restrictive eligibility standards, offer lower benefit amounts, and make it more difficult to access benefits. But US poverty rates are highest among Black, Native American, and Latinx families, so CTC contractions disproportionately disadvantage families of color.

A Fragmented State Policy Landscape

To better understand the scope and significance of state differences in CTC policy, our team developed a database of all state CTC policies proposed and enacted between January 2018 and December 2024. During this time, state legislatures introduced 144 CTC bills and enacted 44 of them (~31%). Nineteen states had no discernable legislative activity during this time, 12 states and the District of Columbia proposed but failed to pass any legislation, and 19 states passed legislation pertaining to state child tax credits. Some states proposed or passed multiple bills during this period. Overall, there was an uptick in CTC legislative activity at the state level after 2021, with the most significant spike in proposal and passage in 2023.

Policy Design for Equity Across the States

To grasp the equity implications of these state-level developments, we created a measure to assess the degree to which CTC policy is designed in ways that are likely to reduce racial or economic disparities. We call this a bill’s equity-enhancing capacity. At base, all CTC policies are equity-enhancing because they provide resources to low-income families. However, some CTC bills incorporate additional equity-enhancing features, while others introduce elements that are likely to undermine equity. For example, bills that streamline application processes or extend benefits to new populations are designed to enable greater equity. Alternatively, bills that introduce restrictions on who can access CTC benefits or increase the administrative burdens associated with doing so, are designed in ways likely to erode equity. To systematically capture this, we assessed three dimensions of equitable distribution: 1) eligibility, 2) benefit amount, and 3) accessibility.

Based on the content of each CTC policy, we assigned a score for each of these dimensions. We then generated a composite score to reflect patterns across all three elements. This score ranges from 1 to 8, with a median of 4 and a standard deviation of approximately 1.48. Bills with a score of 1 represent minimally equity-enhancing proposals that target a very narrow group of beneficiaries, introduce eligibility restrictions, and offer minimal financial support. At the other end of the spectrum, bills with a score of 8 represent maximally equity-enhancing CTC proposals that offer the highest levels of financial support, have the broadest eligibility criteria, and erect no administrative burdens.

We found substantial variation across states in terms of equity scores, with some states falling on the low end of the range (e.g., Idaho, Utah), most falling in the middle (e.g., Illinois, Maryland, New Mexico, North Carolina), and a few falling on the high end (e.g., California, Rhode Island, Minnesota).

The Political Feasibility of Equitable Policy

As we navigate a political moment where the federal government openly maligns the very idea of equity, the concrete realities of disproportionate suffering (higher poverty, lower median income, etc.) in racially marginalized communities point to an enduring imperative to foster economic freedom for everyone—especially those who have been systematically excluded from its promise. In the context of volatile and even cruel federal policy shifts, state governments will prove even more critical. But state politics is a difficult terrain, and it is unclear whether there is sufficient political appetite for equity-enhancing policies in many states. Nevertheless, our evidence suggests that CTC policies are frequently proposed and regularly enacted in a wide range of state political contexts. Moreover, CTC policies need not be restrictive or harmfully draconian to maintain political feasibility. CTC policies with mid-range equity scores (3 & 4) are the most frequently proposed and have non-trivial likelihood of passage (50% and 21%, respectively). And in some states, political opportunities make it possible to enact CTC policy that is maximally equitable (scores of 6, 7, & 8).

State child tax credits are a crucial economic support for low-income families, especially Black and Latinx families. But inequitable policy design across the country risks proliferating a fragmented patchwork of CTC benefits that make the fate of vulnerable families capriciously contingent on which state they happen to live in—often along lines that harm communities of color. The United States is no stranger to profound inequity stemming from polarized state politics. Yet, in a time of deep economic precarity, equitable policies are both necessary and possible.

Organizers, advocates, policymakers, and philanthropic leaders fighting for policy that aligns with the needs of our most vulnerable communities would do well to pay close attention to how policy is designed, where equitable policies are possible, and how to create the political conditions to make them more achievable in more places. As seen recently in Connecticut and New York, policy advocates and legislators can champion key equity-enhancing features of the 2021 expanded federal CTC, including refundable credits, increased benefit amounts, monthly payments, and the removal of administrative burdens and age restrictions. By prioritizing these design elements, lawmakers can ensure that state CTCs truly serve as a tool for improving economic security rather than reinforcing inequities across state lines. As states debate the future of child tax credits, this is a critical moment to push for policies that are not just equitable in intent, but also equitable in design and impact.

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