The District faces ongoing budget challenges due to the expiration of temporary pandemic-related resources, post-pandemic shifts in the local economy, and uncertainty in the federal job market. The District’s FY 2026 budget proposes to eliminate a planned child tax credit. This testimony highlights research showing the benefits of child tax credits.

Why This Matters

The District of Columbia enacted a new child tax credit (CTC) worth up to $420 per child under age 6, up to three children. It was set to go into effect in 2025. The first payments would be made in 2026 after families filed their 2025 tax returns. The credit was structured as fully refundable—even very low-income families could receive the full credit. Eliminating the credit will take away a critical support for many families with children.

Key Takeaways

• Research shows that investments in children–particularly those directed at low-income and young children, as the District’s credit would be—can have a long-run payoff of $10 for each dollar invested. This is in part because children are more likely to graduate from high school, have better-paying jobs, and are less likely to interact with the criminal justice system or rely on public benefits later.
• Fully refundable child tax credits reduce racial disparities. Analysis of the federal government’s temporary implementation of a fully refundable child credit in 2021 showed that when all families could access the credit, it reduced Black–White and Hispanic–White income inequality in the bottom half of the income distribution.
• Prior work in the District of Columbia shows that cash payments can help stabilize households and complement other supports to meet families’ needs.

How We Did It

This testimony highlights work at the Urban Institute and elsewhere that shows the benefits of investing in children.