States Should Invest in People and Communities by Enacting and Expanding Child Tax Credits and Earned Income Tax Credits

A flourishing and economically just nation is one where states make abundant investments so that everyone has the foundation they need to thrive. One step they can take is enacting and expanding state-level tax credits that help individuals and families afford the basics while improving tax fairness and reducing poverty, which research has found is associated with improved child and maternal health, school achievement, and other benefits. Sixteen states have enacted a child tax credit, and 32 states plus the District of Columbia and Puerto Rico have enacted their own version of the federal Earned Income Tax Credit (EITC).

These state-level child tax credits and EITCs build on the success of both federal credits. And like the federal versions, they are an important tool for advancing equity: people of color, women, and people who immigrated to the United States are overrepresented in low-paid work and in families with little to no earnings, due in part to structural barriers like labor-market discrimination and underinvestment in their schools and communities. And by bolstering families’ incomes, the credits also boost local communities and state economies.

In 2026, several states improved existing credits or enacted new ones. They include:

• A new Child Tax Credit: Rhode Island will become the 16^th state with a child tax credit when it becomes available for tax year 2027. It is worth $330 for every child under 18. It is fully refundable, meaning that the full value is available to families no matter how much they owe at tax time.
• Expanded EITCs: Oregon decoupled from several provisions of the harmful 2025 Republican reconciliation law and enacted a 5 percent increase to the state’s EITC at the same time. Washington expanded its Working Families Tax Credit to reach an additional 460,000 households by lifting income and age restrictions, funded by a new millionaires tax projected to raise more than $3 billion annually for this and other new investments. Opponents are challenging the tax in court, and voters are slated to decide the issue this fall.

• Increased child tax credit amounts: Arizona boosted its Child Tax Credit from $100 to $125. However, the credit is not refundable, meaning that if the credit exceeds a filer’s income tax liability, they do not receive the full value. Lawmakers, both in Arizona and in other states with non-refundable credits, should improve their credits by making them refundable and including families who earn the least.

  New Jersey boosted its refundable Child Tax Credit by 25 percent, making the maximum credit $1,250 for families earning under $30,000 per year.

• Authorizing localities to create their own Child Tax Credit: Maryland will allow counties to create a local child tax credit. Maryland counties now have the opportunity to extend the reach of both the federal Child Tax Credit and Maryland Child Tax Credit, helping thousands of families afford the basics.

Notably, as described above, several states including Oregon, Washington, and Rhode Island, expanded an EITC or child tax credit and enacted significant revenue-raising policies at the same time. This is particularly important as states face intensifying strain from the sweeping federal tax and spending changes enacted last year, among other fiscal pressures.

These credits are among several income assistance policies such as guaranteed income programs and Temporary Assistance for Needy Families that give families a stronger foundation and begin to address income-related racial inequities. Unrestricted and unconditional cash gives families the autonomy to best address their individual needs while ensuring they can buy necessary items, like diapers and personal hygiene products, that other economic security programs don’t cover.

Lawmakers in states without their own child tax credit or EITC should enact them. States that have limited their credits should make these credits refundable. States should also expand their credits to those left out of each federal credit, particularly by adopting inclusive credits for people who are immigrants who do not have a Social Security number (SSN). States should also expand credits to help certain immigrants or families of immigrants who have an SSN but who may have their credit(s) taken away due to a proposed Trump Administration rule.

States should protect and improve programs that give unrestricted cash to families, like child tax credits and EITCs, as state budgets and families’ wallets strain under the harmful Republican reconciliation law. Many states are already having to make tough budget decisions as they are forced to take on substantial new costs for Medicaid and food assistance through SNAP — previously borne by the federal government — while balancing their own budgets. At the same time, millions of families will lose their health insurance and food assistance, putting the basics even further out of reach. In the face of fiscal and economic uncertainty, child tax credits and EITCs have a proven record of helping families afford the basics and reducing poverty, in turn helping them thrive in the long run. States must protect and raise revenue to pursue both goals.