Tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are proven tools for reducing poverty and boosting local economies. Still, many eligible Ohio families miss out due to mistrust of the IRS or lack of access to tax preparation services.
Ohio’s regressive tax system—where the poorest pay 12.7% of income in taxes while the top 1% pay just 6.3%—makes these refundable credits even more critical.
Expanding these credits has been shown to cut child poverty in half while delivering long-term benefits for children’s futures and regional economies.
What are refundable tax credits, and who benefits?
Refundable tax credits like the Earned Income Tax Credit and Child Tax Credit allow families to receive money back even if they owe no income tax. Unlike non-refundable credits that only reduce tax liability to zero, refundable credits provide the remaining amount as a cash refund.
These credits have the biggest impact for workers aged 25-64 earning below $67,000, especially those with children:
- The Earned Income Tax Credit is a refundable tax credit for workers earning below certain thresholds (based on the number of children).
- The Child Tax Credit is both a non-refundable tax credit available to the majority of working parents and a refundable tax credit available only to lower-income filers.
Marci Blue is a Senior Program Officer with Enterprise Community Partners, which runs the Cuyahoga County EITC Coalition. She sees families use these tax credits for necessities such as utility bills, groceries, and rental payments.
Refundable tax credits can help bridge the gap between low earnings and the high cost of essentials, reducing poverty.
On May 20, United Way of Greater Cleveland hosted its second Community Conversation of 2025, moderated by Stephanie Czekalinski of Ideastream Public Media.
Participants:
- Aidan Davis, State Policy Director, Institute on Taxation and Economic Policy
- Marci Blue, Senior Program Officer, Enterprise Community Partners (Cuyahoga EITC Coalition)
- Danielle Sydnor, CEO, Rise Together Innovation Institute
Ohio's regressive tax system makes tax credits essential
Aidan Davis, State Policy Director at the Institute on Taxation and Economic Policy, says Ohio’s tax system is the 15th most regressive in the country, based on a comprehensive analysis of all 50 states. When accounting for all types of taxes, the poorest 20% of Ohio households pay 12.7% of their income in tax, while the top 1% pay just 6.3%.
Although the percentage of income tax paid by the lowest earners is small (1.5% of income), they are disproportionately impacted by sales and property tax (7.2% and 3.8%, respectively). Refundable credits can help make the tax system more equitable by offsetting the tax burden on low- and middle-income families.
Ohio lags behind other states in creating a tax system that supports lower-income residents. Ohio has an Earned Income Tax Credit, but it is non-refundable, and Governor Mike DeWine’s proposed $1,000 refundable child tax credit for children under 7 was recently removed from the 2025 budget by the Ohio House.
Proven impact: Short-term relief, long-term transformation
The 2021 federal expansion of the Child Tax Credit provided compelling evidence of the power of these tax credits. By boosting amounts, providing monthly payments, and ensuring full refundability, the expansion cut child poverty in half nationally and reduced child poverty in Ohio to a historic low of 5.1%.
Many families used the extra tax refund for immediate needs—rent, gas, groceries, and preschool—directly supporting local economies.
“It’s basic math, really,” explains Danielle Sydnor, CEO of the Rise Together Innovation Institute. “You have expenses, and you have income, and so when we provided families more income, that meant more kids in our community were no longer in households that were experiencing poverty.”
The long-term effects are equally significant. Research suggests that children receiving expanded tax credits would experience better health, improved school outcomes, and higher long-term earnings. Davis emphasizes the generational impact: “These are the kids that are going to be running our country someday, and we need to give them the very best possible ability to have the growth and the stability that they need.”
Early financial security creates a positive cycle. As Davis notes, “if you’re able to get more income into children’s homes at an early age, you know that you’re going to have better outcomes over the long run.”
Limitations of current federal tax policy
While current federal proposals would increase the child tax credit to $2,500 per child, this amount is barely above its inflation-adjusted value. More problematically, 17 million children—1 in 4 American children—would remain excluded from the full credit due to low family earnings, with an additional 4.5 million citizen children excluded because their parent lacks a social security number.
Work requirements create additional complications, often excluding important populations like caregivers between jobs, laid-off workers, those who are sick or disabled, parents of young children who can’t afford childcare, and grandparents caring for grandchildren.
Policy experts advocate for simplification over punitive measures. Marci Blue suggested that rather than focusing on error rates and improper tax credit uptake, “a good goal for policymakers would be to simplify the credits” by making eligibility more straightforward.
The gap: Unclaimed tax benefits
It’s hard to quantify the amount of unclaimed tax credits, but the impact of unclaimed taxes affects both individuals and regional economies.
Research conducted by the Rise Together Innovation Institute estimates that in Franklin County alone, 24,000 households that didn’t file missed out on an estimated $62 million in total unclaimed tax benefits.
That’s millions of dollars that aren’t coming back into the state, observes Rise Together CEO Daniel Sydnor. Those dollars could be “used on local goods and services, and to help lift our families out of the financial situations that they’re in.”
Several barriers prevent families from filing taxes in the first place:
- Fear and mistrust: Marci Blue identified “a fear of the IRS and the tax system itself” where families worry about getting “on the radar for something.” This fear is particularly acute in marginalized communities.
- Lack of banking relationships: Danielle Sydnor highlighted how many urban communities are unbanked, relying on peer-to-peer money transfer services instead of traditional financial institutions. Without human relationships around money, families miss guidance about available credits.
- Historic inequality: Systemic racism has created deep mistrust of government systems. Sydnor explained that the very populations most likely to experience poverty and qualify for credits “don’t trust the systems that are designed to provide them relief.” Past experiences with audits or predatory tax preparers compound this mistrust.
- Complexity of tax credit eligibility: When people don’t understand the eligibility requirements, such as income thresholds or the child tax age limit, they may not try to file for credits.
The path forward
Tax credits represent a proven, bipartisan tool for economic mobility that works when accessible. The challenge lies in ensuring that eligible families can claim these benefits through trusted community partnerships and simplified eligibility criteria.
For Ohio families struggling with one of the nation’s most regressive tax systems, refundable tax credits can offer both immediate relief and long-term opportunity.
This article was drafted with the assistance of generative AI and edited and fact-checked by the author.
