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Tax and Fiscal Policy

Keller Anne Ruble, Associate, Policy Research

Growing up in poverty can have damaging effects on children—brain development is paramount during this time, and contextual factors like food insecurity and unstable or inadequate housing can serve as barriers to healthy development. Despite the challenges that poverty creates, many widely supported tax and fiscal policy measures can be taken to mitigate these factors, many of which contribute to ending the cycle of poverty. ka

Many estimates show that families need roughly double the income of the federal poverty level ($24,250 for a family of four in 2015) in order to meet their basic needs, and that struggling to meet these basic needs puts a significant amount of stress on both parents and children. The estimated 22% of children in our country currently living in poverty are more likely to have lower school performance, higher rates of chronic health problems stemming from damaging levels of stress on the brain, and an increased reliance on public assistance later in life. Early and sustained programs, like the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and Child and Dependent Care Tax Credit (CDCTC), along with simplified policy mechanisms to support access to services can provide supports to families that prevent these negative outcomes.

Numerous studies confirm that families who receive these financial benefits typically use the income supplement to pay bills, meet basic needs, and pay for other expenses that allow them to work, like car repairs. Refundable state EITC, CTC, or CDCTCs means families have better access and ability to enroll their children in quality and reliable child care, which enables parents to earn more by working more consistent hours or improve their education.

When families are able to meet their basic needs, parents can better create and sustain a stable, nurturing home environment that fosters young child cognitive, behavioral, and socio-emotional development. By enacting these refundable credits, states benefit economically in the long run, spending less funds overall in later social welfare costs. It is for these reasons that we believe more states should and will enact tax and fiscal policies that give families, and their young children, a better chance at school and lifetime success.

Throughout this week, ICS staff members, based on their expertise and passions, will present their forecasts of upcoming trends in the field and future research and policy considerations. We invite you to share your reflections on these ideas, to learn more about our vision for 2016 and beyond in our annual report, and to check out our new video.

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