Policies that strengthen family financial security can go a long way toward reducing childhood adversity and enhancing the relationships that help children thrive. When families face financial hardship, it sets the stage for additional stress. Boosting family incomes through tax credits can relieve the pressure, helping to head off childhood adversity before it happens. Illuminate Colorado is proud to be a member of a statewide coalition working to update our state tax code and advance policies to boost family economic security.
To further bolster pandemic recovery, state legislators are currently considering a package of legislation designed to make our tax code fairer for families and workers by closing loopholes that benefit a small number of wealthy people and big corporations. HB21-1311 and HB21-1312, introduced last week, will invest in tax credits for working families and small businesses. HB21-1311 includes provisions to expand the state Earned Income Tax Credit (EITC) and finally fund the Colorado Child Tax Credit (CTC), boosting incomes for families in ways that are proven to reduce poverty.
The EITC and CTC are known to improve the health and well-being of families who receive them, and can even help kids do better in school and lead healthier, longer lives. Children living in poverty are significantly more likely to be reported to the child welfare system and are overrepresented in foster care.
According to a 2020 study analyzing 16 years of recent data, states with a refundable EITC, compared to states without, experienced an 11% reduction in foster care entry rates. If states without a current EITC implemented a refundable EITC, they are estimated to save more than $19 million per year in foster care costs. Putting that data into context, expanding Colorado’s EITC and funding the CTC are approaches to a more racially equitable tax code and child welfare system. Due to historical racism and ongoing discrimination and bias, on average, people of color have less wealth and income. Furthermore, children of color are overrepresented in Colorado’s child welfare system.
Simply put, money allows parents to meet their children’s basic needs for food, housing, health care, and other essentials. HB21-1311 will offset these costs, as well as the cost of child care, for working parents. High-quality child care reduces parental stress and isolation. In another study, it was found that EITC reduces physical child abuse. Abusive head trauma, formerly known as shaken baby syndrome, is one of the leading causes of fatal physical child abuse in the U.S. The study reviewed nonfatal abusive head trauma hospital admission rates from 27 states across 18 years and revealed that states with a refundable EITC had 13% fewer abusive head trauma admissions than states without a refundable EITC. This reduction was likely due to decreased parental stress.
When families have access to meet their basic needs, we strengthen the foundations of families and communities. HB21-1311 is a critical and effective investment in preventing child maltreatment, increasing equity, and creating the conditions in which children and families thrive.
HB21-1311 passed both the House Finance and Appropriations committees and is working its way through the House chamber. Thank you to our hardworking partners at Colorado Fiscal Institute and Bell Policy Center for leading these advocacy efforts.
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