The Council of the District of Columbia voted to become the first city in the United States to implement a local child tax credit this week.
The Council passed a resolution on Tuesday that separated Washington‘s local tax policy from its federal counterpart. The bill is set to “decouple” the district’s tax code from the federal tax code, which was newly amended with sweeping tax cuts under the One Big Beautiful Bill Act. The district’s financial officials estimated that the piece of emergency legislation would save the district government nearly $100 million by the end of fiscal 2025 and nearly $660 million by the end of fiscal 2029.
Nine councilmembers, led by Councilman Zachary Parker, put forth an amendment to use the surplus funds from the tax decoupling on various benefits, including a local child tax credit. Both the tax resolution and the proposed amendment passed during Tuesday’s council meeting.
“The District is set to become the first city in the U.S. to implement a local child tax credit, and it stands to transform lives and reduce child poverty by 25%,” Parker wrote in an X post. “When we lift families out of poverty, we see outcomes in nearly every other area of their lives improve: from education, to health, to employment, and more.”
Under the amendment, district taxpayers with a certain gross income threshold would be eligible for up to a $1,000 credit per qualifying child under the age of 18. The amendment would also scale up the district’s match of the federal earned income tax credit from 85% to 100% and make changes to municipal bond language in the district’s tax code.
Parker has fought for a local child tax credit in the district since taking office in 2023, initially securing the space for it this budget season, but playing a push-and-pull game with Mayor Muriel Bowser over whether it could fit given district budget struggles, according to the Washington Post. With the savings from decoupling President Donald Trump’s One Big Beautiful Bill Act tax provisions from the city’s tax code, Parker seized the moment for the child tax credit. He called the credit a “huge victory.”
“That credit will boost the economic floor for families across the District. It will go into effect in fiscal year 2027, and over the next year, the CFO’s team will work to stand up this credit,” Parker said.
The Council initiated the decoupling emergency tax legislation in large part because the district’s tax policy is similar to the cuts in the federal code, according to WAMU’s Alex Koma. States including Illinois, Colorado, and Michigan have also initiated breaks with the federal tax cuts, according to the 51st.
NANCY PELOSI WILL NOT SEEK REELECTION IN 2026
Eleven out of the 13 district councilmembers passed the policies on Tuesday, while Councilwoman Christina Henderson voted present, and Chairman Phil Mendelson voted against it. Mendelson warned against allocating the saved money to the amendment programs too soon, and how Bowser would set the budget in 2026, according to WAMU.
“I really don’t want to say ‘I told you so’ when we have the budget in April,” Mendelson said.
