Connecticut: An Outlier in Family-Friendly Tax Policy

Authored By 
Lucy C. Xu
Blog contributor 

Not so long ago, we were kids. And we were expensive.

It doesn’t take long to realize just how our parents spent a good deal of their blood, sweat and tears on us. They fed us, they clothed us, they loved us. They paid for the violin lessons, the soccer tournaments and the tuition, not to mention the diapers, babysitters and baby formula. They gave us everything that we needed and more, because that’s what parents do. The cost of raising kids like us is huge, no matter where you’re from, but they wouldn’t have it any other way.

We might take it for granted, then, that our state and national governments would acknowledge these costs and create tax policies to help families afford child care, college tuition and everything else that makes us so expensive. And why wouldn’t they? Children are good for society, and families do everything they can to raise them into productive citizens. They are the future doctors, teachers and pizza-makers. They are the inventors of the next big thing, the ones who will continue to make the world go around. To support parents in this important endeavor of raising children, it would be sensible that the tax code takes these extra costs into account.

Yet compared to other states and countries, Connecticut — progressive, good-government Connecticut — doesn’t do that well. Currently, the federal tax code has four family-friendly policies: the earned income tax credit, the child tax credit, the child and dependent care credit and the dependent exemption. Nearly every state with an income tax has some combination of these family-friendly tax policies, while Connecticut only has one that narrowly benefits our poorest residents. In fact, a family with 3 children making $60,000 a year owes the same amount in state taxes as a family making that same amount but with no children. For a middle-class family in Connecticut, the tax code does not do much to encourage childrearing.

If Connecticut is serious about supporting families raising kids, it’s time that its tax code reflected that commitment. Right now, the state should consider implementing:

1. A state child tax credit as New York has done so successfully. Modeled after the federal child tax credit, New York’s credit reduces the tax bill of over 1.5 million families. Since it’s refundable, New York’s credit benefits lower income families who may owe little in income taxes (but much more in payroll, sales, and property taxes).

2. A child and dependent care tax credit for childcare expenses like existing ones in half of our states. This credit helps pay for essential services such as preschool.

3. A dependent exemption that virtually every other state with an income tax already implemented years ago.

Other countries have also recognized just how important it is to support families raising kids. Canada provides a generous, family-friendly tax policy in both its federal and provincial tax codes. The Canada Child Tax Benefit (CCTB) is a tax-free monthly payment made to eligible families and has been adopted throughout the Canadian provinces and territories. Other countries — like the United Kingdom, Australia and Ireland — also provide a child credit, a childcare credit or a combination of both.

It’s time for Connecticut to catch up. Like other states, Connecticut has taken the right step in adopting its own earned income tax credit (EITC). But the EITC only benefits low-income working parents, leaving out many middle-income parents who are also struggling to make ends meet while raising children. In a place like Connecticut, with one of the oldest and slowest-growing populations in the country, helping families raise kids is a no-brainer. All those violin lessons don’t come free, and neither does a high-quality preschool education or college tuition. But everyone in society benefits when kids get a strong, smart start. Other states and countries have recognized this; it’s time that Connecticut did the same.

This piece was published in the Yale Daily News (with a slightly different title) on September 26, 2014 and reprinted with permission of author. Lucy Xu is a 2014 graduate of Morse College at Yale.

Area of study 
State & LocalTaxation