New research shows what a Child Tax Credit would mean for Illinois’ families and economy

Last month, I noted that Illinois recently has experienced positive economic developments but we are falling behind on the issue of child poverty, which has more than doubled. This has led to renewed interest in proposals that would enact a state-level Child Tax Credit in Illinois.

Now, new research from the Project for Middle Class Renewal at the University of Illinois and the Illinois Economic Policy Institute has detailed what the impacts of such a policy could be for the state’s residents and taxpayers.

In evaluating seven possible Child Tax Credit scenarios ranging from structures that already exist in 15 other states to proposals that have been introduced in the Illinois General Assembly, researchers found a state-level Child Tax Credit in Illinois significantly would reduce child poverty, make the state’s tax code less regressive, create between 3,300 and 17,500 jobs, and grow the economy by as much as $3 billion annually.

Importantly, the report finds that delivering targeted tax relief to low- and middle-income households through a Child Tax Credit would lower government spending on the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), the Earned Income Credit (EIC), and other types of government assistance. Indeed, data shows that when the federal Child Tax Credit temporarily was expanded during the pandemic and child poverty decreased by 36%, Illinois actually spent 15% less on these social assistance programs.

The idea of a state-level Child Tax Credit is gaining momentum here. In 2023, Senate Bill 1444 and House Bill 3950 would have offered a $700 credit per child. This year’s proposal would offer a $300 credit per child. Both frameworks have phaseouts for single filers earning more than $50,000 per year or joint filers earning more than $75,000 annually.

Research shows that either of these frameworks could make a real difference in reversing the recent spike in child poverty that accompanied the expiration of the expanded federal Child Tax Credit. Specifically, a $700 credit per child proposal would reduce child poverty by 8% in Illinois and the $300 structure would decrease child poverty by 3%.

Adopting an even larger maximum credit, like the $1,200 currently in place in Colorado, would reduce child poverty by 13%.

Illinois is well-positioned to absorb any upfront costs associated with enacting a Child Tax Credit. Robust economic growth over the past few years has resulted in 9 credit rating upgrades, a record-high Rainy Day Fund, and tax revenues surpassing expectations—including 4% growth so far this year. Additionally, the research shows that these policies would amount to less than 2% of the state’s budget, with much of the price-tag offset by reductions in spending on other forms of government assistance.

Real-world data demonstrates that implementing a Child Tax Credit would be both fiscally manageable and economically beneficial. But what’s even more clear is that the data strongly favors a bold and meaningful approach, with higher per-child credits producing larger reductions in child poverty and greater economic returns. Child Tax Credits are an investment in children, improving their health, educational, and employment outcomes in ways that generate long-term gains that greatly exceed short-term costs.

That’s why public opinion polls consistently show that voters support Child Tax Credits, with bipartisan backing from Democrats, Independents, and Republicans.

And it’s why 15 other states have established their own Child Tax Credits, including Minnesota, Oregon, and Utah just last year. These Child Tax Credits are bold and meaningful, with maximum values of between $1,000 and $1,750 per child that phaseout based on household income.

Should Illinois join these 15 other states in passing this popular public policy, we would be enacting a pro-growth change that would combat child poverty and lower taxes for low- and middle-income households. That’s a win for the state’s economy, a win for families, and — most importantly — a win for our children.

• Frank Manzo IV, MPP is an economist at the non-partisan Illinois Economic Policy Institute.