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Josie Phillips is a State Priorities Partnership Fellow at Maine Center for Economic Policy.
At a time when rising costs for housing and child care are stressing family budgets, many working families are struggling to afford everyday essentials. By helping families afford necessities like groceries, clothing and child care, the expanded federal child tax credit gave children the stable foundation critical for their healthy development.
By helping families afford essentials — which have been ballooning in price in part due to price gouging from massive corporations — the child tax credit helps give families the stability they need to flourish. For children, the credit provides resources they need to be safer, better nourished and better educated, now and in adulthood. For adults, the credit’s assistance in meeting their families’ basic needs reduces the psychological strain that poverty can place on parents, and even reduces rates of child neglect and abuse.
The child tax credit has such a transformational impact on children’s lives that every dollar spent on the credit has a $10 return on investment to society in the form of increased future earnings, better health, and more education for impacted children. That’s a huge deal.
Maine has witnessed the difference an increased refundable child tax credit would mean for families. The 2021 expansion of the federal child tax credit — which included “refundability” that makes the benefit available to people with little to no income — markedly improved the lives of Maine families by helping them afford necessities like food, rent and child care. But with the expiration of the enhanced credit, families are losing this critical source of financial support, leaving many to fall back into poverty.
Maine’s closest equivalent to the federal child tax credit (called the Dependent Exemption Tax Credit) is a powerful and proven tool to promote children’s immediate and future well-being. This support provides some financial stability to families in the form of a $300, non-refundable annual credit. However, the credit’s value has not been updated to match recent inflation. And because it is non-refundable, the credit’s full benefits are not accessible to Maine families with very low incomes.
LD 1544, An Act to Improve Economic Security for Maine Children by Establishing the Maine Dependent Tax Credit, would create a modernized, refundable child tax credit to create an even stronger foundation for more than 200,000 Maine children, particularly those in families with very low incomes. By making Maine’s child tax credit fully refundable, the proposed law would close a loophole that bars families with no or very low incomes from receiving this crucial support. Updating the value of the credit from $300 to $350 would help families keep up with the costs of essentials and lift an estimated 3,500 Maine children out of poverty, according to the Center on Poverty and Social Policy.
Updating Maine’s child tax credit would help more than just families with children. The credit can also be claimed by families with adult dependents. Bolstering its value and making it available to families with low or no income would also support some of the 166,000 Mainers who provide intensive care services for aging family members or family members with disabilities.
Across the spectrum of family types and compositions — and with savings targeted at people with low and middle income — a modernized Maine child tax credit would enable us to better care for our loved ones, making our communities healthier and more resilient in the process.