Vermont families need both the Child Tax Credit and childcare investments

The Vermont Senate voted Friday to repeal the brand-new Child Tax Credit (CTC) in order to redirect funds to early care and education. But there is no reason to pit the two against each other. Vermont needs both.

The credit, which Vermonters can now claim for tax year 2022, allows families with household incomes up to $125,000 to claim a $1,000 tax credit for each child under 6. Partial credits are available for families with incomes up to $175,000. The credits are refundable, which means the family will receive a cash refund if the credit exceeds what they owe.

The state credit is patterned after the federal Child Tax Credit, which was designed to get cash directly in the hands of families. When the feds temporarily expanded the credit during the pandemic, child poverty declined dramatically across the country, including lifting 4,000 kids out of poverty here in Vermont. Those direct payments also went straight to local economies. They benefited everyone.

Vermont was one of a handful of states that created a state-level credit to fill the gap when the temporary expansion of the federal credit ended. This year 34,000 Vermont kids are eligible for the credit, making it the most robust in the country.

If the CTC is repealed and the funds go to childcare, thousands of Vermont families will lose the credit, but not all of them will benefit from the plan to expand childcare. Vermont Tax Commissioner Craig Bolio told the Senate Committee on Finance last week that many of the lowest-income families receiving the credit and using paid childcare already have those costs covered by state subsidies.

And, as Public Assets and its partners argued in written testimony to the committee, many families that don’t have childcare expenses still struggle to meet basic needs. That’s true even if they’re earning the state average wage. These families will simply lose $1,000 per child that they can hardly afford.

If the strategy of taking from one group of struggling families to give to a different but overlapping group of struggling families sounds familiar, it should. In 2013, then-Gov. Peter Shumlin proposed cutting the state’s Earned Income Tax Credit (EITC), which goes to low-income working Vermonters, to expand subsidies for childcare. Thanks to a concerted effort by families, advocates, and others, the Legislature rejected the governor’s proposal. Lawmakers recognized then that it made no sense to take resources away from families who need them, even for a good cause.

Vermont learned from the campaign to save the EITC that this is not a zero-sum game. Lawmakers do not need to ask families who can least afford it to pay for investments that benefit everyone. Instead, they can ask Vermonters who can afford it to contribute to both priorities.

The Child Tax Credit and high-quality, reliable early care and education are critical to the wellbeing of families and good for the state’s economy. We do not have to choose. Vermont needs them both.