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Urban Institute Report: Tax Reform Critical for Children
Press Release

September 24, 2013

Ed Walz
(202) 657-0685 (office)

Washington – An analysis released today by the nonpartisan Urban Institute shows that the outcomes of federal tax reform negotiations anticipated this fall could have sweeping consequences for America’s children, with nearly 40 percent of federal investments in children on the negotiating table. The report, Kids’ Share 2013: Federal Expenditures on Children in 2012 and Future Projections, was commissioned by First Focus and written by Urban Institute researchers Julia Isaacs, Sara Edelstein, Heather Hahn, Katherine Toran, and C. Eugene Steuerle.

“The stakes for children in tax reform are incredibly high,” said First Focus President Bruce Lesley. “If Congress gets it right, we could see real gains on child poverty – if they don’t, forty percent of federal investments in children are at risk.”

The four largest tax policies for children together account for $164 billion in investments in children, more than twice the value of Medicaid for kids. Those policies are the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), the dependent exemption, and the portion of employer-sponsored health insurance deductions attributable to children.

Federal tax policy also serves as an effective defense against child poverty. Together, the EITC and CTC lift more than five million children out of poverty every year.

Kids’ Share 2013 also finds that federal investments in children dropped $28 billion from 2011 to 2012, attributing much of the decline to the exhaustion of funding provided under the American Recovery and Reinvestment Act (ARRA). The 2009 economic stimulus law directed nearly one-fourth of its funding to education, children’s health, child abuse and neglect prevention and response, and other children’s priorities. The authors note that the 7 percent 2011-2012 decline in federal investments in children is the largest year-to-year percentage drop since the early 1980s.

“While we would expect spending to decline in the wake of a recession, children’s programs have seen more of a drop than overall federal spending,” said Julia Isaacs, an Urban Institute senior fellow. “Because of the slow economic recovery, spending on children was dropping at a time when many families were still struggling to make ends meet.”

The authors also found that, unless Congress changes current policy, federal investments in children will continue to fall, as a share of the budget, through 2023. Key projections through 2023 include:

  • Of every increased dollar of federal spending, children will be allocated less than two cents;
  • Medicare, and the non-children portions of Social Security and Medicaid account for two-thirds of projected increases in federal spending;
  • While health care costs and broader eligibility are projected to increase investments in children’s health, most other categories of funding for children’s initiatives are projected to fall, including a 6 percent decline in early care and education, a 8 percent drop in nutrition for children through initiatives like the Supplemental Nutrition Assistance Program and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and a reduction of 16 percent in K-12 education; and
  • Funding for children through tax policy will also decline, as inflation erodes the real value of the Child Tax Credit.

“The budget and policy choices Congress is making right now will shape the future for America’s children, and what this report shows is that if we want a brighter future for kids, we need action and better choices from Congress,” said Lesley.


First Focus is a bipartisan advocacy organization dedicated to making children and families the priority in federal policy and budget decisions. For more information, visit

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