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.