Financial Freedom: The Case for a Kansas Child Tax Credit
Nathan Kessler | December 10, 2024
The need for a state child tax credit (CTC) in Kansas has never been clearer. Basic necessities have become more expensive, and more Kansas families are forced to make difficult financial decisions every day.
Since 1995, and particularly within the last three years, the cost to raise a child has risen rapidly while wage growth has not kept up. The cost to raise a child born in 1995 was approximately $239,000 while the cost to raise the same child born in 2015 is closer to $311,000. Costs have risen 30%, but inflation-adjusted household income is higher by just 21.6%, underscoring the eroding purchasing power of a typical U.S. family.
Despite substantially higher costs associated with raising a family, lawmakers haven’t yet taken the opportunity to deliver targeted relief for families feeling the greatest pinches in their budgets. A recent tax package (SB 1 passed during the 2024 Special Session) delivered hundreds of millions of dollars in tax cuts through income tax changes, but many of the provisions failed to deliver targeted relief to families with the greatest financial need.
Lawmakers can’t wait to prioritize families in the tax code any longer. Now is the time to boost the budgets of thousands of parents and caregivers so their children have what they need to thrive.
Why a Kansas CTC?
What Kansas families really need is a refundable state CTC that returns money to every Kansas household with a child. While there are a number of potential policies that provide targeted relief to families, a refundable CTC is by far one of the most effective. In fact, evidence shows that federal CTC payments in 2021 kept 2.9 million children from falling below the poverty line.
A refundable CTC gives parents the financial freedom to decide what is best for their family, ensuring maximum utility for both the individual family and the broader society. For some, this can mean more food on the table or more gas in the car, while others may purchase school supplies, pay down debt, or supplement their emergency savings.
A 2022 study analyzed how families used federal CTC payments and found that the top three uses were for routine expenses, essential items, and groceries. These results suggest that state CTC payments would be put to good use ensuring the needs of Kansas children are met.
A Kansas CTC can be designed so that every family receives something while still prioritizing families most in need. An amendment to SB 539 during the 2024 session would have provided for a refundable CTC for parents with children under the age of 5. This CTC would have begun at $600 per eligible child for Kansas households with the lowest incomes and phased out to $25 per child for families with the highest incomes. The equitable design of this CTC plan guaranteed that every eligible household would benefit from the policy but still provide the greatest impact to struggling Kansas families.
If it had passed, this CTC would have cost less than approximately $50 million each year. The value of these refunds to the Kansas economy would have been far greater than the cost. Most of each dollar returned to parents would have worked through the economy, multiplying the economic impact of the initial investment.
While the bill ultimately died due to other provisions in the bill, it is clear there is both a will and a way to truly deliver for Kansas families.
The Time Is Now
A CTC is among the most effective tools for lifting children out of poverty, as parents utilize the payments for food and essential items. In 2021, as parents were provided an expanded federal CTC, 13.4% of Kansas children were food insecure. Just one year after that additional tax relief expired, 19.1% of children in the state did not know where their next meal would come from.
Policies like a state CTC that provide a greater sense of economic security would make Kansas a more attractive place to start or raise a family. Eleven states and D.C. already have a refundable CTC; by adopting similar legislation, Kansas will be more competitive in attracting and retaining families, growing Kansas communities for generations. This improved competitive position could lead to a stronger labor force and increased economic activity, in addition to the primary benefit of improving the lives of children in Kansas.
In an economy where costs are still top of mind, the time is right for Kansas lawmakers to adopt a state CTC. Any discussion of tax relief during the 2025 session must prioritize children and families, and a refundable CTC is the most effective, equitable, and individualized option for delivering a greater sense of security.
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