DeWine child tax deduction leaves poor families out
At his “state of the state” address on Tuesday, Ohio Gov. Mike DeWine put forth a unique proposal to the Ohio legislature — to enact a $2,500 per child state tax deduction.
When I first saw this, I was excited! The 2021 federal child tax credit expansion lifted over 2 million children out of poverty. After Joe Manchin torpedoed efforts to preserve the tax credit, a number of states moved to create state versions of the effective anti-poverty program. Could Ohio become the thirteenth state to enact a child tax credit?
But then I took a look closer — wait, this wasn’t a state tax credit that DeWine proposed, but a tax deduction.
How a credit works is that you get back money that you owe, sometimes in excess of what you owe. So a $2,500 tax credit would put $2,500 in the pocket of a taxpayer.
A deduction just means that you can subtract that amount from your income to calculate your taxes. So if you make $50,000 in a year and you subtract $2,500 from that, you pay taxes on $47,500 in income. With Ohio’s tax at that bracket of 3.226%, that means you’d save about 80 bucks.
A problem with a tax deduction from an equity standpoint is that they help out wealthy people more than low-income people. This is because the higher your income gets, the more you have to pay in income tax. So those deductions help wealthy families more than low-income families.
What does this look like in practice? Well, let’s look at some examples of how this could shake out for families.
Ashley Smith is a single mother of two from Jacksontown, Ohio, a small town northeast of Buckeye Lake. She makes an average amount for Jacksontown: a little over $24,000 a year. She would save zero dollars from the proposed child tax deduction.
Jessica Miller is a single mother of two from Dayton. She makes an average amount for a family in Dayton: a little over $43,000 a year. She would save a little under $140 with the proposed child tax deduction.
Amanda Johnson is a single mother of two from Chillicothe. She makes an average amount for a family in Chillicothe: a little over $66,000 a year. She would save a little over $160 with the proposed child tax deduction.
Sarah Brown is a single mother of two from Centerville, Ohio, a suburb of Dayton. She makes an average amount for a family in Centerville, a little over $100,000 a year. She would save a little over $180 with the proposed child tax deduction.
Brittany Williams is a single mother of two from New Albany. She makes an average amount for a family in New Albany, nearly $208,000 a year. She would save nearly $200 with the proposed child tax deduction.
So Brittany, supporting a family on over $200,000, will receive a $200 benefit from the child tax deduction. Meanwhile, Ashley, supporting a family on $24,000, will receive nothing. Nearly all families in poverty will receive nothing from this benefit, while middle- and upper-income households will receive $70 to $100 per child, with benefits higher for families in higher tax brackets.
If the DeWine Administration wanted to help children in poor families, it could create a better system by providing a credit per child. The administration could even create an income cutoff to keep costs low by targeting benefits toward lower-income households. The current proposal, on the other hand, excludes the families that need help the most while giving the largest breaks to the most well-off Ohio families.
Rob Moore is the principal for Scioto Analysis, a public policy analysis firm based in Columbus. Moore has worked as an analyst in the public and nonprofit sectors and has analyzed diverse issue areas such as economic development, environment, education, and public health. He holds a Master of Public Policy from the University of California Berkeley’s Goldman School of Public Policy and a Bachelor of Arts in Philosophy from Denison University.
This commentary was republished from the Ohio Capital Journal under a Creative Commons license.
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