In the face of high inflation, New Jersey’s brand-new child-tax credit is already being eyed for expansion, including a doubling of the maximum credit, to $1,000 per child.

Thousands of New Jersey families will be able to collect for the first time this year a state-level child-tax credit of up to $500 per child when they file their state tax returns under a newly established tax break.

On Tuesday, New Jersey Policy Perspective, the think tank that lobbied heavily for the credit last year, released a new report calling for upping the size of the maximum per-child credit, from $500 to $1,000. It also recommends increasing the age limit of children eligible to be claimed for the credit, from children under 6 years old to those under 12.

Under the think tank’s proposal, eligibility for the credit would continue to be restricted to households earning up to $80,000 annually to keep the tax breaks targeted to those most in need of relief — and in danger of living in poverty.

“When you think about the kinds of costs that eat up a family’s budget – food costs, housing costs – these are the areas where inflation has hit the hardest,” said Peter Chen, an NJPP senior policy analyst who authored the report, in an interview with NJ Spotlight News.

“When we think about families in the working-class and middle-class range, these are the families that, nationally, have been hit the hardest by inflation,” Chen said. “It’s always important to help families with costs, but in the current environment of continually rising prices, a child tax credit and an expansion of the child tax credit is even more necessary.”

No-brainer?

The new report from NJPP comes just weeks before Gov. Phil Murphy, a second-term Democrat, is due to present a new annual budget to lawmakers in Trenton.

The months that follow the governor’s budget message are typically a time when changes to state fiscal policies are put up for consideration and review by lawmakers in the run-up to the July 1 start of the state’s fiscal year.

This year, all 120 seats in the Legislature are up for election in the fall, and concerns about taxes and affordability are already front and center in the State House during a period of prolonged high inflation amid the global pandemic.

‘This is an easy, no-brainer, dollars-and-sense way to help make life more affordable for families in New Jersey.’ — Peter Chen, New Jersey Policy Perspective

It’s too early to say whether the expansion proposal will make it into the final budget. But Chen said he hopes both lawmakers and members of the Murphy administration examine the case being made for some adjustments.

“We’re hopeful that this session, and the upcoming budget process, will provide additional relief for families and that they’ll consider the child tax credit [expansion] given that it passed with overwhelming, bipartisan support in the last budget cycle,” Chen said.

“This is an easy, no-brainer, dollars-and-sense way to help make life more affordable for families in New Jersey,” he said.

Other tax policies under review

In recent weeks, Murphy, a former Wall Street executive, has indicated he is in favor of allowing a tax surcharge that’s been levied for the last several years on New Jersey’s highest-earning businesses to expire as scheduled at the end of 2023.

Later this year, many New Jersey residents will also begin receiving beefed-up direct property-tax relief benefits under the state’s newly established “Anchor” relief program. The deadline for applying for Anchor benefits is Feb. 28.

Starting this year, thousands of residents will begin collecting the up to $500 child-tax credit that was established at the state level by Murphy and lawmakers last year. The parents of an estimated 372,000 children under the age of 6 who make up to $80,000 annually are eligible for the credit, according to the nonpartisan Office of Legislative Services.

Those earning up to $30,000 annually are eligible to receive $500 per-child tax credits. For those earning between $30,000 and $40,000 annually, the credits are worth $400; for those earning $40,000 to $50,000 annually, they are worth $300; and for those earning $50,000 to $60,000 annually, they are worth $200. For people who earn between $60,000 and $80,000 annually, the credits are worth $100.

The tax break was established as a refundable credit, which means those who are eligible can claim the full amount regardless of what they owe in state income taxes. The tax credits are expected to cost the state up to $141 million annually, according to OLS estimates.

The argument for an increase

Under the latest proposal from New Jersey Policy Perspective, the parents of children between the ages of 6 and 11 who also meet the income limit for the current tax credit would become newly eligible to receive per-child credits ranging from $100 to $500, based on income.

‘When we think about whether something is affordable at a state and fiscal level, something like the child tax credit is both a strong economic stimulus … and it’s good for the state as a whole by supporting families and allowing families to continue to live here.’ — Peter Chen, New Jersey Policy Perspective

The new proposal also calls for doubling the size of the per-child credits for parents with children under the age of 6 years old who meet the original income limits.

This would allow maximum credits of $1,000 to be provided to households earning up to $30,000 annually with children under 6. In addition, the new maximum credit for households earning between $30,000 and $80,000 with children under 6 would be doubled at each step of the income scale established for the original credit, according to the report.

“A higher benefit for young children recognizes that young children are more likely to live in poverty than their older counterparts,” the report said.

NJPP estimates the proposed expansion would benefit another nearly 200,000 households in New Jersey. And while the proposal could cost an estimated $245 million to enact, Chen argued it would also boost the state economy because the benefits are likely to be spent locally on key necessities.

“When we think about whether something is affordable at a state and fiscal level, something like the child tax credit is both a strong economic stimulus — it has a strong multiplier effect — and it’s good for the state as a whole by supporting families and allowing families to continue to live here,” he said.