Expanding tax credit will make Massachusetts a leader in family policy again

MASSACHUSETTS CONSISTENTLY ranks as the top state to raise a family. The reason is simple: our family policies – from paid leave and childcare to education and safety – and pro-growth policies make us a leader among peer states.

In 2021, Massachusetts once again led the pack by introducing the country’s first universal tax credit for children and other dependent family members. The Child and Family Tax Credit provides $180 for up to two children under 12 years old or elderly/disabled adult family members.

A groundswell of bipartisan support quickly followed the quiet introduction of this relatively modest credit to expand its generosity, reach, and simplicity. Gov. Baker made doubling the credit to $360 a central provision in his fiscal year 2023 budget proposal. Not to be outdone, Gov. Healey campaigned and was elected on a promise to more than triple the credit’s value to $600, remove the two-children cap, and expand eligibility to children under 13 years old. Both Republican and Democratic members of the Legislature have sponsored substantial expansions of the credit.

Despite broad support, these reforms have yet to come to fruition. Concerns about fiscal complications have made some members of the Legislature hesitant to make good on earlier promises. However, the fiscal year 2024 budget passed last month set aside substantial funds for tax relief, and the House and Senate are currently negotiating differences between the two chambers’ proposals.

The House proposal, exercising financial caution, would make good on the $600 Child and Family Tax Credit by conservatively phasing in the increase over three years before indexing it to prevent erosion from future inflation. On the other hand, the Senate proposal would only raise the credit to $310 – less generous than Baker or Healey proposed – and leave it unindexed and open to future erosion.

According to a new MassINC poll, the public is eager to see more progress in expanding the credit. When asked, an overwhelming majority of respondents – 77 percent – expressed support for steadily raising the credit to $600 over the next three years as the House has proposed. Support rises to 86 percent among respondents with children and is strong among both Democrats and Republicans.

Residents have good reasons for supporting action now. Before the 2021 reforms, the credit’s predecessor was last increased in 2001 and left unindexed to be eroded by inflation. Coincidently, it would be worth $310 today if it had been indexed 20 years ago. If Massachusetts wants to continue to be a leader in family policy, we need to do more than simply erase the decline of the last two decades.

Recognizing the credit’s success and broad bipartisan support, 10 states have introduced or expanded child tax credits since 2021. These credits are now larger than Massachusetts’s, and many reach a broader array of children by age. We now have the least generous refundable family credit among states with one, and we are in the middle of the pack for age eligibility.

The people of Massachusetts have always considered themselves something like a city upon a hill—the eyes of all Americans are upon us. Whether it’s Bay Staters looking to see promises of tax relief fulfilled or peer states competing with us to attract workers by being the best place to raise a family, the message remains: Don’t pass up this opportunity to once again make Massachusetts a leader in family policy.

Charlotte Bruce is a senior research and policy analyst with Children’s HealthWatch. Joshua McCabe is the director of social policy at the Niskanen Center.