Who will qualify for the new child tax credit? And other child tax credit questions, answered

[MUSIC PLAYING] EMILY BRIGHT: Maybe you've heard the predictions about the potential impact of a brand-new tax credit created this year by Minnesota lawmakers.

PEGGY FLANAGAN: This child tax credit will lower child poverty by a third, y'all, a third.

[APPLAUSE AND CHEERS]

EMILY BRIGHT: That was Lieutenant Governor Peggy Flanagan outside the State Capitol in May. Now, you're not alone if you have questions about how the credit works and who will qualify and whether it can really change the course for families struggling with financial insecurity. Political reporter Brian Bakst decided to dig into the program and is with me now to talk it through. Hey, Brian.

BRIAN BAKST: Good afternoon, Emily.

EMILY BRIGHT: So I want to start with the basics of this tax credit. Can you give us a glimpse as to how much it will be and for whom?

BRIAN BAKST: I'll preface my answer with an important caveat. This isn't a one-size-fits-all credit. There's not a single amount that will go to every family, and that's somewhat by design. The maximum credit per child is $750. But the actual amount depends on a few factors.

The first is income, and we can go deeper into that in a little bit. The second is interaction with other working family tax credits that some qualifying households get now. And the last is the number of children because this one doesn't cap the credit at families of a particular size.

EMILY BRIGHT: What income levels is this aimed at?

BRIAN BAKST: So it's largely targeted at families living below or right around the poverty line but also some just above the line. Again, the poverty threshold differs based on the number of people in your family. But for reference, a family of four with earnings below $28,000 is considered to be in poverty.

More robust tax credits will go to families in that range or beneath it, so $29,500 for single filers and $35,000 for a couple. Above that, the credits start to taper until phasing out at higher income levels. But the eligibility threshold expands as household side does.

EMILY BRIGHT: Brian, I'll bet you have some examples at the already.

BRIAN BAKST: I do. For a couple with one child under age 17 and earnings of $35,000, they could expect about $1,000 more than they're getting in credits now. But a family with four children and making $90,000, which-- who doesn't necessarily apply for other tax credits now, might still get around $750 total in a child tax credit.

EMILY BRIGHT: So what's the rationale for staggering the relief over, say, having a simple-to-explain delivery model?

BRIAN BAKST: Yeah, it's designed that way to provide a broad pool of families that will get at least something but still put the biggest infusion into the families most on the financial edge. Single-parent households fare particularly well. For instance, a single parent of four making $40,000 would net about $4,200 more than current tax credits.

Lawmakers batted around the idea of doing a flat amount for every qualifying child. But House Taxes Committee Chair Aisha Gomez told me that while that might have made it easier to understand and generated more headlines, it would have reduced the intended impact.

AISHA GOMEZ: Just thinking about all of the-- all the challenges facing people who are raising kids in those kind of really dire economic circumstances in our state, we get those families $1,750 a kid instead of $1,000 a kid, which, again, would have been maybe a simpler thing to communicate about. That just really makes a huge difference. It's going to make a huge difference in families' lives. And so that was more than a good soundbite that was what we were going for.

EMILY BRIGHT: So about that intended impact-- where does that headline-making estimate of one third cut in child poverty come from?

BRIAN BAKST: The Legislature and the State Department of Revenue have been working with the Center on Poverty and Social Policy at Columbia University. Researchers there were closely tracking poverty trends when the federal government temporarily bumped up child tax credits during COVID-19. The center gave Minnesota officials a somewhat cursory analysis that predicted the tax credit proposal here would drop child poverty from around 7% to about 4 and 1/2%. I should note that the center's researchers wrote in a memo to Minnesota leaders that they should view the estimate with caution, since it's based on limited and lagging data.

EMILY BRIGHT: But from the sounds of it, Peggy Flanagan, Governor Tim Walz, and others aren't being bashful about touting the expected drop in child poverty.

BRIAN BAKST: No, they're not. It's a key talking point, maybe because the credit itself is complicated to convey. Representative Gomez says she's a bit uncomfortable using it too much because she doesn't want to leave the impression that it will solve all the problems of families struggling to make ends meet. And I also spoke with academics who specialize in poverty issues. They, too, said the projection has limitations.

EMILY BRIGHT: Well, like what?

BRIAN BAKST: Well, for one, it's a statistical measure. The extra state money could, indeed, lift more families above that poverty line, especially those who are hovering close to it now. But listen to what James Ziliak, an economics professor at the University of Kentucky and director of that school's Center for Poverty Research had to say.

JAMES ZILIAK: The poverty line itself is a somewhat blunt instrument on well-being because the way it's set up, if your household income is $1 below the line, you're classified as being poor. And if you're a dollar above the line, you're classified as being not poor. But those households $1 below versus $1 above are going to be the same.

BRIAN BAKST: Ziliac has been part of a national panel urging the Census Bureau to update its poverty metrics to account for more financial measurements on both the income and expense side to better reflect current conditions of poverty.

EMILY BRIGHT: Did the experts you spoke with have advice about how Minnesota might want to track progress?

BRIAN BAKST: Yes, University of Minnesota-- excuse me, University of Michigan Professor Luke Shaefer is director of that school's Poverty Solutions Initiative. He favors creation of a dashboard that goes deeper into symptoms of poverty, food hardship, access to quality child care, and even credit scores and bank balances.

LUKE SHAEFER: Years ago, we only had poverty estimates from survey data that would often come out more than a year after the time period that the data was representing. Now, we just have many different kinds of data. We're blessed with this emergence of many different sources of data, so you can track some of the impacts of programs like this.

BRIAN BAKST: I should note that state leaders say they're on the front end of this. So the Walz administration plans to have several agencies collaborate on long-term analysis of the credit's effect on things like educational achievement, health care outcomes, and more metrics for the affected families. There's a realization that some of those measurements will require years of study, while the statistical look of who has climbed above the poverty line could show quicker results.

EMILY BRIGHT: Now, speaking of timing, how soon and how often will these payments be parceled out?

BRIAN BAKST: A great question. When the federal government supersized its tax credit to a few thousand dollars, it advanced the payments. And a lot of families got hundreds of dollars a month rather than a big payment at tax time.

Minnesota isn't prepared to go that route yet. So it's just a one-time-a-year payment. The legislation allows the Department of Revenue to split up the payments into installments.

But it's going to take some time and some administrative legwork to get there. Also, for some recipients, it might not be a whole lot on a monthly basis. So if and when an advanced payment structure is devised, officials expect that to be semiannually or quarterly.

EMILY BRIGHT: Brian, this is all super interesting. And I'm sure you're going to be keeping an eye on the results as this gets phased in. So thank you for coming on.

BRIAN BAKST: You're welcome, Emily.

EMILY BRIGHT: That's NPR political reporter Brian Bakst.