A Tax Break for Vermont Families that Benefits Everyone

February 17, 2022

Last week the House passed and sent to the Senate ground-breaking, bipartisan legislation to support parents and families.  As part of H. 510, the new Vermont Child Tax Credit would pay families the equivalent of $100 a month for every child in the household age six and under.  All but the wealthiest families would qualify, making this the most far-reaching such legislation in the country. 
The Child Tax Credit is designed as both an anti-poverty measure and an incentive for young families to put down roots in Vermont.  It could be used to help with any of the expenses that parents face when raising small children—food, clothing, diapers, rent—or anything else.  It will be available to parents or guardians with childcare costs, but also to those who, out of choice or necessity, are staying home to look after their children themselves. 
The credit would make Vermont’s already progressive income tax system even fairer.  It would be fully refundable, meaning lower-income households who owe no Vermont tax would still receive a payment.  The majority of the tax cut would go to families earning under $70,000—most of whom would see their Vermont tax liabilities reduced to zero.  The credit would be structured so that it would not impact eligibility for other benefits.  And it would phase out at household incomes above $200,000, meaning that middle-income families who might not qualify for other programs would be eligible.  Few families in Vermont with incomes over that level have young children, meaning that nearly every Vermont parent would benefit. 
Once signed into law and fully implemented, families would receive two $600 payments annually for each eligible child—one in August coinciding with the start of the school year, and one in the spring. 
Is this the right time to lower taxes, and is this the right way to do it?  Yes, and Yes.  The new credit comes at a crucial time, just as the popular, expanded federal child tax credit has expired.  Thanks to a booming economy, state revenues are up and projected to remain strong, creating room for a carefully targeted program that reduces poverty, supports parents and children, and leaves enough resources to maintain and expand other programs.
Payments to families with young children can have a tangible impact on their well-being.  A recent study projected that the expanded federal child tax credit would cut in half the number of children living in poverty.  Separate research showed that infants’ brain activity was enhanced when low-income mothers received a cash stipend for the first year of their baby’s lives.
Raising a child is expensive, and Vermont frankly could use more children. Our school-age population began shrinking a generation ago, and the workforce shortage we have been experiencing since before the pandemic is, in part, a shortage of young adults.  Not only are we one of the oldest states in the country, but the birthrate among Vermonters of child-bearing age also ranks near the bottom.  For parents considering staying or moving to Vermont, or adding to their families, the credit would provide  an extra incentive that ends up helping everyone.
We are living through times that call for dramatic changes to our social compact, with resources that provide us with an opportunity to do so.  The Child Tax Credit delivers on the promise to provide help where it will have the most impact, bringing us closer to an economy that works for all Vermonters.