Cash would flow directly into the hands of Ohio parents under a proposal from Republican Gov. Mike DeWine.
As part of multibillion-dollar budget negotiations this session, Ohio lawmakers will consider the new refundable tax credit worth up to $1,000 per young child, to be paid for by an increase in tobacco taxes.
In neighboring Indiana, the state Senate approved a bipartisan plan to give a $500 refundable tax credit to families with an infant.
If passed, the measures would mark the first time a Republican-controlled state has implemented a refundable child tax credit. Advocates view that type of credit as key because it delivers cash even to poor families with little or no income tax liability.
State interest in creating or expanding child tax credits boomed after the pandemic-era expansion of the federal child tax credit delivered cash directly to millions. That move quickly lifted millions of children out of poverty. But the expanded tax credit expired in 2021 — leading to a doubling in the nation’s childhood poverty rate in 2022.
Fifteen states and the District of Columbia have some child tax credit programs. But so far, all 11 states with refundable credits are led by Democratic governors and legislatures.
“Obviously, it’s great to see more places are interested in it, but I think it really comes down to the design of them and who’s included and who’s excluded,” said Megan Curran, policy director at Columbia University’s Center on Poverty and Social Policy. “That’s going to determine how effective they are at the end of the day,”
In Indiana, lawmakers want to include parents who recently adopted a child or those with children under the age of 1. Even those with no income could qualify for the refundable credit. As proposed, eligibility would top out for families with an adjusted gross income that’s 720% of the federal poverty level — about $191,000 for a family of three.
The legislation’s Republican sponsor, state Sen. Greg Walker, said the program could be expanded over time to include older children.
“I think it’s — pardon the pun — a baby step to introduce a credit for a newborn,” he said. “I don’t think anyone disputes … all the costs associated with bringing a new baby into the world.”
Like the federal tax credit, Indiana’s would empower parents to spend the money however they choose. Aside from helping thousands of families cover escalating costs of living, Walker said it also would provide relief for lower-income families who pay a higher proportion of their earnings in taxes because of the state’s flat income tax rate.
While the state Senate unanimously passed the bill, Walker said details of his proposal could change during the legislature’s budget process. As proposed, the infant tax credit is expected to cost the state about $34 million per year.
“It would be another $34 million in circulation in the hands of consumers that are not sitting on the money,” he said. “This is not going into a 401(k) account.”
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