Children from the KU Kids Deanwood Child Care Center complete a mural celebrating the launch of a local child tax credit in 2021 in Washington, D.C. New research suggests cities could significantly reduce childhood poverty by creating their own child tax credit programs. (Photo by Jemal Countess/Getty Images for Community Change)

Child tax credits are becoming more popular across the country, with more than a dozen states offering them as financial relief toward the cost of raising kids.

But new research suggests cities could significantly reduce child poverty by offering child tax credit programs of their own.

An analysis by the Center on Poverty and Social Policy at Columbia University and the left-leaning Institute on Taxation and Economic Policy found that municipal programs could move the needle with relatively small amounts of money: offering $1,000 or less per year to low- and middle-income families could cut child poverty rates by 25% in several cities.  

Researchers say this sort of new assistance would not only boost household finances, but also likely create more demand for local businesses, stabilize housing markets and increase local tax revenue.

The study focused on 14 cities: Baltimore; Charlotte, North Carolina; Chicago; Denver; Houston; Jacksonville, Florida; Los Angeles; Minneapolis; New York; Oakland, California; Philadelphia; Phoenix; Seattle; and the District of Columbia. The analysis found that most of those cities could make significant gains by spending less than 15% of municipal revenues on new child credit programs. 

In Minneapolis, for example, researchers said a new program that cost less than $30 million per year would cut the city’s poverty levels by half when accounting for existing state and federal credits. (The mayor there has recommended spending about $2.03 billion in the 2026 fiscal year budget.) 

The prospect of creating new tax credit programs would likely pose financial and logistical challenges. Cities already are juggling many other priorities including public safety and housing affordability, while at the same time facing what some experts have characterized as a “fiscal crisis” from growing climate change costs, federal funding cuts and declining downtown activity.

Some cities, including Baltimore, New York and Philadelphia, have city income taxes that could incorporate a child tax credit. But, the research noted, cities without that tax managed to distribute pandemic recovery funds through basic income programs. That experience shows cities could create their own standalone applications, leverage IRS data-sharing agreements or  work with third-party administrators.

“So you could use a similar sort of outreach approach, which wouldn’t necessarily be as comprehensive or systematic as a city that already has its own income tax system in place, but it’s a potential option,” said Ryan Vinh, an author of the study and a research analyst at the Center on Poverty and Social Policy. 

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, researchers found. But the expanded tax credit expired in 2021 — leading to a doubling in the nation’s childhood poverty rate in 2022.

Advocates favor refundable tax credits that provide money directly to families. While parents must still file tax returns to receive the benefit, refundable credits give parents funds even if they earn too little to owe income tax, providing financial relief for groceries, medical care or rent. 

This year, several conservative-led states explored new child tax credit programs, though proposals offering the biggest benefits to families fizzled in Indiana and Ohio. So far, no city has implemented its own credit. 

While many cities and states are facing tight budget constraints, Vinh said a reduction in federal support will likely put more pressure on local governments to tackle challenges like poverty. The federal government has slashed funding for safety net programs including Medicaid and the nation’s largest food assistance program, the Supplemental Nutrition Assistance Program. 

“A lot of these things will either lead to the erosion of benefits over time, a loss of benefits, or kind of a decline in what families are able to receive,” Vinh said. “We don’t fully know the number yet, but we do know that child poverty will most likely increase as these program restrictions increase.” 

Stateline reporter Kevin Hardy can be reached at khardy@stateline.org