Budget

Washington Failed to Expand the Child Tax Credit. Can Albany Get Kids Out of Poverty Instead?

One in five kids in New York live in poverty. Legislators are pushing Hochul to fulfill her promise to cut that rate in half.

Julia Rock · April 9, 2024

New York City Governor Kathy Hochul sits in front of a group of small children on a blue carpet.

Governor Kathy Hochul visits a classroom in New York City on July 25, 2022. | Kevin P. Coughlin / Office of Governor Kathy Hochul

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One hundred days into her tenure, New York’s self-described “first mom governor” signed a law committing to slash the state’s child poverty rate by half. She had inherited a serious problem: In the decade leading up to Governor Kathy Hochul’s 2021 inauguration, more than seven hundred thousand children in New York, or about one in five, had been living in poverty — including nearly one in three Black and Latino children.

“Alleviating poverty for all New Yorkers — especially our youngest — is a key priority for my administration,” Hochul said the following year.

The state still has a long way to go. New York has the fifth-highest rate of child poverty in the nation, according to the state Office of Temporary and Disability Assistance, or OTDA. Buffalo, Rochester, and Syracuse are in the top 10 US cities for child poverty, with more than 40 percent of kids living below the poverty line. By an estimate OTDA has used, the policies enacted since 2021 may only reduce child poverty by 7.6 percent by 2031.

With the state budget process now underway, some lawmakers are pushing for a more dramatic shift: an attempt to lift children out of poverty by revamping the state’s tax credits for families. New York Democrats see the effort as a chance to win a battle their national counterparts lost. The federal government temporarily alleviated poverty for millions of kids by expanding the child tax credit early in the pandemic, but when President Joe Biden and Senate Democrats tried to make the change permanent, they couldn’t pass it in a Senate that needed Joe Manchin’s support to overcome Republican opposition.

New York’s current child tax credit, called the Empire State Child Credit, cuts off at a lower limit of $10,000 annual income — meaning the poorest families, who make less than that, are ineligible for the maximum credit. The Assembly has proposed expanding this and other tax credits, while the Senate wants to replace the existing child tax credit with a new, larger one.

“Often the birth of a child will trigger a spell of poverty.”

—Kate Breslin, Child Poverty Reduction Advisory Council

The Senate provision would mean the state’s poorest families receive hundreds more dollars per child, bringing an estimated 26,000 kids out of poverty and an additional 8,000 kids out of “deep poverty,” according to researchers with the Center on Poverty and Social Policy at Columbia University. The Assembly boost to the Empire State Child Credit would move about 1,000 kids out of poverty, the researchers estimated.

The Senate modeled its plan after a more ambitious proposal from state Senator Andrew Gounardes, called the Working Families Tax Credit, which would give families a heftier sum. Gounardes is still pushing for his measure, which he estimates would slash child poverty in New York by 20 percent, to be included in the state’s budget.

“This policy would get us a big chunk of the way towards reaching the goal” of cutting child poverty in half, Gounardes said.

In New York and nationally, children are more likely to live in poverty than any other age group.

“Often the birth of a child will trigger a spell of poverty,” said Kate Breslin, president and CEO of the Schuyler Center for Analysis and Advocacy and a member of the Child Poverty Reduction Advisory Council, a group the 2021 law created.

Almost two decades ago, New York implemented the Empire State Child Credit, the first state-wide child tax credit in the country. It gives low- and middle-income families a maximum of $330 per child annually, and about 1.3 million families received the credit in 2022, the last year with data available. While the state expanded it last year by making children younger than four years old eligible, the full credit still only kicks in when a family has a household income higher than $10,000, supposedly to incentivize work.

Gounardes’s proposal for a Working Families Tax Credit seeks to correct that gap. Every family, including the poorest ones, would receive it. Notably, it would extend to taxpayers who don’t have Social Security numbers, unlike current federal and state earned income credits that exclude noncitizens.

The overall size of the credit would increase, too, because it would combine the Empire State Child Credit and the state’s Earned Income Tax Credit (another program for low-and middle-income families) into a single, more generous program, gradually implemented over five years. It would be “universal yet targeted”: The poorest qualifying families would receive $800 per child in the first year and $1,600 by year five, while the highest-earning families would get $150 at first, rising to $500.

The idea for the Working Families Tax Credit “came from a frustration born out of the expiration of the federal expanded child credit.”

—State Senator Andrew Gounardes

“New York’s proposed WFTC is the boldest state proposal we have seen since the introduction of the [Empire State Child Credit] almost two decades ago,” Joshua McCabe, director of social policy for the Niskanen Center, a center-right think tank, wrote in a blog post last year.

The Senate’s proposal would offer low- and middle-income taxpayers $550 per child. Gounardes said it “lays the foundation” for his larger package.

The Assembly proposed leaving the Empire State Child Credit in place but increasing its size, as well as expanding eligibility for the Earned Income Tax Credit to higher earners and taxpayers without Social Security numbers.

“We’re trying to get something as close to the full Working Families Tax Credit in the final budget as possible,” said Alexa Arecchi, chief of staff for Assemblymember Andrew Hevesi, who sponsors the bill in his chamber. “So it was a pretty good starting point that both houses had an iteration of it in their proposals.”

A sepia toned photograph of a child offering a newspaper to a man in a hat with a pipe.

Seven year old boy selling papers at Columbus Circle, New York City, on October 8, 1910. | Paul B. Schumm via Library of Congress.

New York has tried other strategies to shrink its child poverty rate. Last year, the state increased the minimum wage and made investments in child care. The Child Poverty Reduction Advisory Council, which said both measures could put a dent in the issue, will give the state recommendations for how to meet its 50 percent goal later this year.

Pete Nabozny, a council member and policy director at the Rochester-based advocacy organization Children’s Agenda, urged the state not to wait to act.

“Child tax credits are a really effective way to reduce child poverty,” Nabozny said, and “are going to be part of the council’s recommendations.”

New York governor Kathy Hochul kneels in a red suit with a child looking out in distress

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According to the Center on Poverty and Social Policy, tax credits briefly helped New York come close to its 50 percent goal. When the federal government expanded its child tax credit early in the pandemic, child poverty in New York was slashed by more than 40 percent.

“The idea for this came from a frustration born out of the expiration of the federal expanded child credit,” Gounardes told New York Focus.

Hochul’s January budget proposal did not include expansions of family tax credits. Her office did not respond directly to questions about whether she’s willing to entertain the legislature’s proposals.

The price tag will be the big hurdle. The Institute on Taxation and Economic Policy estimates that the Senate’s proposal would cost about $600 million a year.

Hochul has been resistant to raising taxes to fund new programs, and she plays the leading role in budget negotiations. The legislature proposed a larger spending package than Hochul, funded in part by $2 billion in higher taxes on millionaires, billionaires, and corporations. Though boosting taxes on the wealthy is popular, Hochul has shot down the idea as a “nonstarter.”