State-level child tax credits are an effective tool for reducing child poverty and increasing affordability for working families. Well-designed legislation can ensure that child tax credits support families with the greatest needs, are broadly accessible to low and middle-income families, and do not penalize families with steep phase-outs or benefit cliffs. 

The Empire State Child Credit (ESCC), established in 2006, provides a modest child credit of up to $330 per child for families with dependent children birth to 16 years old. However, unlike 10 states with refundable child tax credits, it excludes low-income families from receiving the maximum credit.  

The FY 2024-25 New York State budget included a $350 million one-time supplement to the Empire State Child Credit. The supplemental credit is calculated as a percentage of a taxpayer’s credit, as follows: 

• 100% for families with incomes under $10,000; 

• 75% for families with incomes between $10,000 and $24,999; 

• 50% for families with incomes between $25,000 and $49,999; and 

• 25% for families with incomes of $50,000 and above. 

While the supplemental credit in the 2024-25 state budget provided some relief to low-income and middle-class families, structural flaws in the design of the state’s Empire State Child Credit and the supplement credit suggest that policymakers should take a more measured and thoughtful approach to family tax policy in 2025-26 and beyond.  

Structural Issues with the Supplemental Empire State Child Credit 

1. The Supplemental Credit Maintains a Regressive Phase-in Structure 

The supplemental credit does not eliminate the existing ESCC’s regressive phase-in structure that penalizes low-income families. No family earning below $9,667 per year can receive the full credit, and families with multiple children do not receive the full credit until their income is much higher. New York’s current phase-in structure is more regressive than the federal child tax credit established under President Trump in 2017. Only a tiny number of families with incomes between $9,667 and $9,999 and one child were eligible to receive a $330 per child supplemental payment.

2. The Phase-in Excludes the Lowest Income Children and Perpetuates Racial Inequities 

According to Columbia University’s Center on Poverty and Social Policy, 27% of New York children do not receive the full $330 ESCC because their family earnings are too low or because they are excluded from the full benefit. Before the pandemic, Black and Hispanic children were 1.75 and 1.6 times, respectively, were more likely to receive partial credit than their white counterparts. 

3. The Supplemental Credit Design Creates Benefits Cliffs 

When coupled with the ESCC’s current phase-in structure, the supplemental credit’s abrupt changes in percentage matches at various step-down points create steep cliffs for families. 

For example, a family with three children earning $24,999 would receive a $743 supplement, but a family earning one additional dollar would only receive $495. One additional dollar of earnings would cost that family $248 in supplemental tax credits. 

A Stronger Alternative – the Working Families Tax Credit 

In the upcoming legislative session, policymakers should consider a child tax credit reform and expansion proposal developed by Assemblymember Andrew Hevesi and Senator Andrew Gounardes. In its 2024-25 one-house budget resolution, the New York State Senate proposed changes that would have implemented the first year of a multi-year phase-in of the Working Families Tax Credit (A.4022-C(Hevesi)/S.277-C(Gounardes). The Governor, Assembly and Senate should all include that legislation in their respective budget proposals during the upcoming legislative session. 

Specifically, the Working Families Tax Credit permanently increases the state’s child tax credit to $550 (up from $330) and eliminates the credit’s phase-in to ensure low-income families can receive the full credit. To reduce the fiscal cost of this expanded child tax credit, the legislation proposes reducing the state’s Earned Income Tax Credit from 30% to 25% of the federal Earned Income Tax Credit in the first year.  

The graph below compares the proposed first year of the Working Families Tax Credit (the 2024-25 Senate proposal) and a combined version of the existing and supplement Empire State Child Credit. 

However, because the Working Families Tax Credit reduces (and ultimately eliminates) the EITC, a fairer comparison includes the combined value of both the state’s EITC and CTC. The graph below compares the Senate’s WFTC 2024-25 budget proposal with the value of the state’s EITC, ESCC, and supplemental ESCC.  

The approach put forward by the WFTC legislation would provide larger tax benefits to the lowest-income filers and household making more than $50,000 a year, while the framework adopted this past year would provide a larger benefit to households currently receiving peak EITC benefits. There are certainly merits to each proposal, but the WFTC’s framework seems to move New York toward a more sensible and understandable approach to supporting families. 

When fully implemented, the WFTC would consolidate the state’s existing CTC, EITC, and Dependent Exemption into a highly progressive, yet broadly available tax credit for families in New York.  

The table below details how the Working Families Tax Credit would grow over a period of five years to become the strongest child tax credit in the nation. This legislation, when fully enacted, would lift countless children out of poverty and ensure New York is a more affordable state for millions of families. 

Pete Nabozny is Director of Policy at The Children’s Agenda.