New Child Tax Credit is a big deal, but more can be done for middle class families

In the last days of its most recent legislative session, Illinois took a historic step, becoming the 15th state to enact a Child Tax Credit.

Child tax credits are powerful policy tools proven to reduce child poverty and boost economic activity.

Illinois lawmakers approved a credit for low-income families with children under age 12. Beginning in the 2024 tax year, the credit will cap out at $170 for families with one child, $270 for those with two children, and just more than $300 for those with three or more kids. The following year, these credits will double.

To claim the credit, residents must qualify for the Earned Income Tax Credit. This means that Illinois’ Child Tax Credit is available to those earning up to $47,000-$63,000 annually, depending on marital status and household size.

To be sure, this is a big deal. The measure goes further than Gov. J.B. Pritzker’s initial proposal — limited to low-income families with children under age 3. It will affect hundreds of thousands of families and lift tens of thousands of children out of poverty. By any objective standard, this is a good first step.

That said, it is important to remember that the “Great Affordability Crisis” is putting just as much pressure on the middle class as it is on lower-income brackets. All families need to spend $1,000 more every month to buy the same goods and services that they did three years ago. Baby food and baby formula are 28% more expensive now than three years ago. This is on top of rising housing costs. In the Chicago area, the income needed to afford a mortgage has increased by 61% since January 2020.

But perhaps nowhere is the sticker shock of high prices more alarming than for child care.

According to the National Database of Childcare Prices, median child care center costs in the Chicago area ranged from $13,000 for preschoolers to nearly $18,000 for infants in 2023. That’s $250 to $350 per week. This exorbitant cost forces families to make difficult decisions, like choosing less-healthy but cheaper food options. Many parents drop out of the workforce altogether because they cannot afford to send their children to day care.

With inflation still viewed as the biggest problem facing the country today, there certainly are actions Congress could take to provide more relief. A one-year expansion of the federal Child Tax Credit that was included in the American Rescue Plan was credited with cutting child poverty nearly in half in 2021 while boosting the incomes of working families. It also was wildly popular among Republicans and Democrats alike.

A more targeted bipartisan measure to expand the federal CTC has since been negotiated, and is projected to benefit more than 16 million children in the first year. However, it has failed to win election-year passage in a bitterly divided Congress.

Illinois need not wait for federal action. There’s no reason state lawmakers can’t build upon the new Child Tax Credit in future sessions. Indeed, expanding the credit to middle-class families — as states like Minnesota and Vermont have done — also would make our state more competitive in the race to attract new workers and businesses.

Research from the Illinois Economic Policy Institute and the University of Illinois shows such actions would directly benefit hundreds of thousands of vulnerable children, slash childhood poverty even further, and boost the economy by billions of dollars per year. But most importantly, it would build upon what the new credit currently offers — essentially one week’s worth of day care costs for most eligible families.

Ultimately, when it comes to the moral imperative of reducing child poverty, every little bit helps. Lawmakers have taken a historic first step in investing in sound policy that’s also popular politically. By considering future expansions in the years ahead, lawmakers can continue to address the “Great Affordability Crisis,” while strengthening our economy and our middle class in the bargain.

• Frank Manzo IV, is an economist at the nonpartisan Illinois Economic Policy Institute.