Using Tax Reform to Lift Children Out of Poverty
March 14, 2017
WASHINGTON, D.C. – A powerful coalition today released a paper that offers lawmakers a blueprint for using tax reform to improve the standard of living for children in the United States. At a time when nearly half the nation’s children – and more than three in five children of color – live in poor or low-income households, the paper is both a stirring call to action and a roadmap to help Congress use tax reform to address this problem, which stifles America’s growth and prosperity.
Produced by the U.S. Child Poverty Action Group, “Family Tax Policy: A Path Forward to Lifting Children Out of Poverty” notes that the federal tax code is one of the most powerful tools available to combat child poverty. When coupled with safety net programs, family tax credits have the ability to lift children out of poverty, bolster our economy, and create brighter futures for children and families. Just four federal tax policies – the Earned Income Tax Credit, the Child Tax Credit, the dependent exemption and children’s share of the tax exclusion for employer-sponsored health insurance – account for nearly 40 percent of federal investments in children, it says. But, the paper warns, these important credits, exemptions and exclusions may be at risk as policymakers debate a comprehensive overhaul of the tax code.
“As lawmakers reform our tax system, the well-being of children should be their primary concern, particularly children in the most vulnerable communities: Black, Latinx, Asian, Native American, LGBTQ+, and low-income families. Failing to invest in children hurts our economy,” said Kristin Rowe-Finkbeiner, CEO and executive director of MomsRising, an online and on-the-ground organization of more than 1 million mothers and their families. “Tens of thousands of our members – moms and dads across the country – have spoken out to strengthen the Earned Income Tax Credit, the Child Tax Credit and the Child and Dependent Care Tax Credit because these policies support children and families and significantly boost our economy. It is shameful that so many children are growing up in poverty. We need to be smart about tax reform in order to change that.”
“Century Foundation research indicates that the existing child tax credit is one of the most effective ways to reduce child poverty, but policy makers can do more to support children in need,” said Andrew Stettner, senior fellow at The Century Foundation. “Data shows that strengthening the child tax credit would deliver the most significant improvements for America's youngest children, those aged 0 - 6 years old, and those born into very poor families. The evidence is clear - public policy matters when it comes to reducing child poverty in cities and states across America.”
“Low-income families are working hard – but the upside down tax code isn’t working hard enough for them,” said Andrea Levere, president of the Corporation for Enterprise Development (CFED). “Congress can and should build on proven tools in the tax code so they more effectively help families build wealth and save for a prosperous future for their children.”
“If Congress truly cares about tackling child poverty, they should strongly consider the tax code recommendations in this paper,” said Bruce Lesley, president of the First Focus. “The revisions outlined should be a wake-up call to Congress that there are sensible, reasonable solutions that are effective at ending child poverty. With 43% of American children in poor or low-income households, increasing a family’s cash income is critical for a family’s economic security – and our nation. We urge Congress to take these recommendations seriously.”
“Too many of our nation’s children are at disadvantage from the time they are born. We must do more to help lift these families out of poverty,” said Mark Shriver, president of Save the Children Action Network (SCAN). “We believe investing in high-quality early childhood education is the most effective way to break the cycle of poverty and to ensure equal opportunity for all Americans. What’s missing is the political will to make the necessary choices and pay for programs that work. SCAN is proud to work with the Children’s Poverty Action Group to provide our nation’s leaders with innovative options to help make sure all kids are given a strong start in life.”
The paper urges policymakers to protect existing tax-based policies that help improve the standard of living for children, as well as to make improvements that will better support families in their pursuit of economic mobility. It cautions that eliminating nearly all credits, deductions and exclusions (sometimes called loopholes) from the tax code in favor of lower marginal tax rates – as many suggest – could wipe out some tax code provisions that help low-income families, those living in poverty and families with young children.
“Family Tax Policy: A Path Forward to Lifting Children Out of Poverty” looks in depth at tax credits; tax deductions; child savings accounts and asset building; and other tax policies to consider what would benefit children and families. It offers a range of possible solutions and fixes to existing policy that would help ensure the tax system benefits families with children at all income levels. The U.S. Child Poverty Action Group will distribute it to every member of Congress and Trump administration officials.
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The U.S. Child Poverty Action Group aims to ensure the federal tax policies helping families and children are not only protected in the tax code during the comprehensive tax reform debate in the 115th Congress, but are strengthened to better serve poor and low-income children and families, in particular. The members that produced the new paper are the Corporation for Enterprise Development (CFED), First Focus Campaign for Children, MomsRising, National Association for the Education of Young Children and Save the Children Action Network (SCAN). The Century Foundation provided research assistance on the child tax credit.