REPORT: Making New Jersey Affordable for Families: The Case for a State-Level Child Tax Credit

For Immediate Release

February 22, 2022 – A state-level Child Tax Credit would make New Jersey a more affordable place to raise a family and help set kids up for success later in life, according to a new report by New Jersey Policy Perspective (NJPP).

The report, Making New Jersey Affordable for Families: The Case for a State-Level Child Tax Credit, analyzes two possible models for a state-level Child Tax Credit — one targeted specifically towards young children (under age 6), and another that includes all children under 18 and adult dependents up to age 24. Using either of these two proposals, a state-level Child Tax Credit would help low- and middle-income families raising children by filling in gaps left behind by other programs, ensuring aid goes to families who need it most, and limiting red tape by paying families directly through the tax code.

“Making New Jersey affordable for families raising children means giving them the resources they need to address everyday challenges,” said Peter Chen, report author and Senior Policy Analyst at NJPP. “A Child Tax Credit would help families meet the high costs of food, rent, child care, and everything else kids need to be happy and healthy. The federal Child Tax Credit has shown that this is a policy that works, and one that can and should be replicated at the state level.”

The Young Child Tax Credit proposed in the report would provide a maximum benefit of $582 for each eligible child. Approximately 449,000 children in 186,000 households would benefit from the program. The All Ages Tax Credit proposed in the report would provide a maximum benefit of $187 for each eligible child. Approximately 792,000 children in 424,000 households would benefit. 

Each proposal would provide tax credits at the full amount for each child in families living at up to 100% of the federal poverty level, phasing out to $0 at 250% of the federal poverty level. Each proposal would cost the same amount at roughly $100 million.

“A state Child Tax Credit would be a transformative investment in New Jersey families,”  said Renee Koubiadis, New Jersey Citizen Action’s Anti-Poverty Network Program Director. “Many low-and moderate-income families struggle to pay for food, clothing and housing for their children, not to mention medical expenses, child care, after-care for school-age children, and transportation. Providing a tax refund for working families will make New Jersey much more affordable for hundreds of thousands of residents. It will also help ensure we can raise children who are safe, healthy, educated, and that they have all the opportunities they need to prosper in the future.”

The Child Tax Credit proposals in the report are inspired by the widely successful expansion of the federal Child Tax Credit that reduced food insecurity across the nation and kept millions of families with children out of poverty.

“The evidence from the federal Child Tax Credit is clear: giving money back to families helps reduce poverty, improve race equity, and stabilize family finances,” said Whitney Tucker, Deputy Director of Research at the Center on Budget and Policy Priorities, a think-tank in Washington, D.C. that has studied the benefits of the federal Child Tax Credit. “It’s time for states to build on this success and help families provide a healthy, successful life for their children.”

Given New Jersey’s high cost of living, the federal Child Tax Credit is not enough to support many low- and moderate-income families who struggle to make ends meet. The report finds that one in ten New Jersey residents live below the federal poverty level, and 76 percent of New Jersey’s low-income households have a high housing cost burden.

“I’m a single dad with two kids, and the federal Child Tax Credit made a world of difference to me and my family last year,” said Luis Mercado-Rivera, All Kids Thrive Navigator at Arm In Arm, a Trenton-based social service agency. “I used the extra money to pay for my son’s clothes and for the maintenance and insurance on my daughter’s car, which she uses for both school and work. A state Child Tax Credit would help many New Jersey families like mine pay for utility bills, get caught up on rent, and not put off medical bills. It would mean peace of mind and a badly needed helping hand for parents.”

Under either of the state-level Child Tax Credit proposals, the entire tax benefit would go to families in the bottom 60 percent of earners and help advance racial equity since Black and Hispanic/Latinx families make up a disproportionate share of this income group.

The report also recommends that the state invest in substantial outreach for free tax filing and non-filer portal assistance to make sure all eligible residents benefit from a Child Tax Credit.

Read the full report here.

Watch a recording of the report release here.

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New Jersey Policy Perspective (NJPP) is a nonpartisan think tank that drives policy change to advance economic, social, and racial justice through evidence-based, independent research, analysis, and advocacy.