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Policy Matters Ohio: Refundable tax credits for working families put kids first Read more news...

Policy Matters Ohio: Refundable tax credits for working families put kids first

As policymakers consider more tax cuts during the lame duck session, one key reform is missing: refundable tax credits for working Ohioans. Ohio has no refundable tax credits for working people. Instead the state spends millions to provide refundable credits to certain business owners and tens of millions for corporations. Refundable credits such as the federal Earned Income Tax Credit send much-needed income to workers.

Poverty rates in Ohio remain high despite improvements in the job market. There were still 115,000 more Ohioans living in poverty in 2017 than in the year prior to the last recession.Child poverty is exceedingly high. Cleveland has the highest child poverty in the nation — nearly half of all kids. Cincinnati had the third highest child poverty rate in the nation. More than 513,000 Ohio kids lived below the poverty line last year. This has long term consequences for our children and our state. Policy makers have failed to address this crisis. The Earned Income Tax Credit (EITC) is a tax policy designed to help. Yet, Ohio’s EITC remains one of the weakest in the nation.

When the Ohio EITC was enacted in 2013, legislators made three policy decisions that limited the credit’s effectiveness. The Ohio credit is not refundable. It has an odd income cap, and the credit is also smaller than average state credits.

State policy too often works against kids. Policymakers have an opportunity to increase tax fairness, smooth some benefit cliffs, and offset some of the support being lost to changes in the state’s child support program. By increasing the Ohio EITC to 20 percent of the federal credit, eliminating the income cap, and making the credit refundable the state would secure a more stable and bright future for children living in working poor households. The state cannot afford to ignore this tool as we strive to eradicate infant mortality and increase school success.

To learn more, read the full report here