By Emily Wildau
Sept. 25, 2023
During the height of the COVID-19 pandemic, economic assistance policies like the expanded federal Child Tax Credit resulted in a record decline in child poverty. Now, with the end of COVID-era assistance, the nation saw a record increase in child poverty – clearly showing us that poverty is a policy choice.
On September 12 and 14, the U.S. Census Bureau released two data sets: One set reveals the national impact of the end of the expanded federal Child Tax Credit and the other tracks changes in poverty based solely on monetary income (i.e., income from wages and earnings, excluding tax credits and non-cash assistance like SNAP).
The first data set, the Current Population Survey, provides primarily national-level data and two different poverty measures. The first is the Official Poverty Measure (OPM), which just measures poverty using monetary income. The second is the one that is especially valuable for policymakers and advocates. That is the Supplemental Poverty Measure (SPM), which reflects the ways in which tax credits are effective in reducing poverty. The SPM data released last year showed the largest one-year decline in child poverty on record, a result of the COVID-era expansion of the federal Child Tax Credit (CTC). The new data from 2022 showed us the inverse – between 2021 and 2022, the U.S. experienced the largest one-year increase in child poverty as policymakers allowed the federal CTC expansions to expire.
This policy decision in Congress was a choice to actively push children nationwide back into poverty.
We know that both federal and state tax credits work really well to alleviate poverty. Using averaged data from the Current Population Survey from 2020, 2021, and 2022, New Mexico’s rate of overall poverty using the OPM sits at 18.2%, the worst in the nation. But when you calculate New Mexico’s poverty rate during that same timeframe using the SPM to reflect the impact of state tax credits, our overall poverty rate drops to 10.2%, significantly closer to the national average of 9.8% as opposed to landing us in last place.
Even though federal lawmakers made a policy choice that increased child poverty, New Mexico is fortunate that our leaders at home have implemented state-level tax credits like the Working Families Tax Credit and our new state Child Tax Credit to make a better choice for our kids and families. The state also increased child care assistance eligibility to help more working families spend less of their income on care, allowing them greater ability to cover basic household expenses. And New Mexico has also enacted policies like paid sick leave and increased the minimum wage, meaning more working families are earning higher wages, too.
The policy choices to increase monetary income for working families are beginning to show up in the second data set that the U.S. Census Bureau released – the American Community Survey. As mentioned, the American Community Survey tracks poverty solely based on monetary income. Because New Mexico has worked to improve income and wages, the poverty rate for all ages decreased by 4.3% between 2021 and 2022. During this same time, the U.S. poverty rate barely changed. The most exciting decrease in poverty comes for children younger than six years old. While the nation saw poverty decline by nearly 5% for young children, New Mexico saw poverty for children under six improve by 21%.
The moral of the story is this: Poverty is a policy choice. We know what works to decrease poverty for our kids and families. Congress should make a different choice and bring back the COVID-era version of the CTC. And New Mexico can continue on the path to choosing prosperity over poverty by continuing to improve the fairness of our tax code, continuing and increasing highly effective tax credits for working families, and continuing to make sure workers are earning wages that cover basic needs.
Emily Wildau, MPP, is a Research and Policy Analyst and KIDS COUNT Coordinator at NM Voices for Children.