The Proposed New York City Child Tax Credit

Analysis of Senate Bill S2238, introduced by Senator Andrew Gounardes.

As New York’s legislative session progresses, lawmakers are proposing various changes to the state’s income tax code. Senate Bill S2238, sponsored by State Senator Andrew Gounardes, would establish a New York City Child Tax Credit (NYC CTC) while restructuring the existing School Tax Credit (STC) to raise revenue to offset the cost of the NYC CTC. Using PolicyEngine’s household calculator and microsimulation capabilities, this analysis examines the specific effects of Senate Bill S2238 on individual families as well as its impact on the budget, income distribution, and poverty.

PolicyEngine projects that in 2025, Senate Bill S2238 would:

• Generate $93.3 million in state revenue

• Affect 57% of NYC residents, with 32% seeing increased net income and 25% seeing decreased net income

• Lower poverty by 0.8% and child poverty by 2.0%

• Reduce the Gini index of income inequality by 0.3%

The School Tax Credit, like other tax credits available to New York City residents, is administered through the New York State tax system. While these credits specifically benefit residents of NYC, they are funded at the state level as part of New York State’s broader tax and revenue structure. New York City income tax revenue flows to the state’s tax administration before funds are allocated back to the city through various programs and credits. The current STC structure consists of two components that vary based on filing status and income level:

1. The fixed amount provides $63 ($125 for joint and surviving spouse filers) to filers with state AGI at $250,000 or less.

2. The rate reduction amount increases with taxable income and is limited to filers with taxable income below $500,000. For filers with taxable income below $12,000 ($21,600 for joint filers and $14,400 for heads of households), the rate reduction amount equals 0.171% of taxable income; above that threshold, it equals 0.228% of taxable income.

Figure 1 shows the total amount of the School Tax Credit for a single filer based on household income.

Figure 1: NYC School Tax Credit for a Single Filer Based on Household Income

Senate Bill S2238 would reduce the School Tax Credit at $5 per $100 of earnings exceeding $75,000 ($150,000 for joint and surviving spouse filers). The proposed structure of the STC can be seen in Figure 2 below.

Figure 2: Reformed vs. Current School Tax Credit for a Single Filer Based on Household Income

At the same time, the legislation would introduce a $300 fully refundable Child Tax Credit for NYC residents with children under the age of 18. This credit would also phase out at 5%, starting at $75,000 and $150,000.

The impact of Senate Bill S2238 varies based on household composition and income level. To understand this, let’s examine different family examples and how the proposal changes their net income.

See how a New York City Child Tax Credit would affect your household with our personalized calculator.

Table 1: Impact of Senate Bill S2238 on Various Household Compositions

A single adult with $50,000 in earnings and zero children would continue to receive their current School Tax Credit at $152¹ as their income is below the phaseout threshold of $75,000. Additionally, because they have no children, they are ineligible for the NYC CTC, leaving their net income unchanged. However, if their earnings increase to $85,000, their STC would phase out completely, reducing their net income by $232 (what they would otherwise receive from the STC if Senate Bill S2238 were not implemented).

For a single parent of one making $50,000 a year, their net income would increase by $300 as their STC would also remain unchanged at $152, but they would now receive the $300 NYC CTC. The STC phases out from $75,000 to $78,040 of earnings, and the CTC phases out from $75,000 to $81,000, so at $85,000 of earnings, their net income falls by $221.² Figure 3 displays the change in net income for a single parent with one child under Senate Bill S2238, while Figure 4 shows how marginal tax rates are affected.

Figure 3: Change in Net Income for a Single Parent of One Child Under Senate Bill S2238 Based on Household Income

Figure 4: Change in Marginal Tax Rates for a Single Parent with One Child Based on Household Income

In summation, households with no children are unaffected if their earnings are less than $75,000 (or $150,000 if filing jointly). Households with children below these thresholds would receive an additional $300 for each child under 18. Above these thresholds, the credits gradually phase out, but families with children would remain better off until reaching their “breakeven point” — where the change in net income becomes zero before turning negative. Beyond the breakeven point, a family’s net income decreases until their taxable income reaches $500,000, at which point their change in net income returns to zero since they do not qualify for the current School Tax Credit or any proposed changes. Table 2 displays the breakeven points for single and married households with zero to four children.

Table 2: Breakeven Points by Household Composition

Rounded to the nearest $100.

Using PolicyEngine’s microsimulation capabilities through 3 years of pooled data (2021–2023) from the Current Population Survey (CPS), we can also estimate the impact of Senate Bill S2238 on New York City at large.

Phasing out the School Tax Credit would raise $427.1 million in 2025, while implementing the CTC component of Senate Bill S2238 would cost $333.8 million, generating a surplus of $93.3 million in state funds.

As displayed in Figure 5, the proposed legislation provides net benefits to the bottom six income deciles on average, while the seventh decile is essentially unchanged. Conversely, households in the top income decile would see an average reduction of $551.

Furthermore, while the average dollar amount gained in each decile in the bottom half of the distribution would vary, households in these deciles would see their net income increase between 0.2% and 0.3% on average.

Figure 5: Average Benefit of Senate Bill S2238 by Income Decile³

Fourteen percent of residents in the first income decile would gain more than 5% of their net income with the proposed legislation. This is a larger portion of residents receiving over a 5% net gain in any other decile (see the dark blue portion of the bars in Figure 6). Seventy-two percent of NYC residents in the top decile would see a loss that is less than 5% of their net income.

Figure 6: Winners and Losers of Senate Bill S2238

Senate Bill S2238 would lower the city’s Supplemental Poverty Measure by 0.8% and child poverty by 2.0%. PolicyEngine projects the legislation would have no impact on deep poverty.

Figure 7: Poverty Impact of Senate Bill S2238

Finally, the city’s Gini index of income inequality would drop by 0.3%.⁴

Senate Bill S2238 would limit the School Tax Credit by phasing out benefits at 5% beginning at $75,000 ($150,000 for joint and surviving spouse filers). The legislation would also establish a $300 NYC Child Tax Credit for children 17 and under, phasing out at the same parameters as the reformed STC. Childless households under the phaseout thresholds would be unaffected, while families with children below $75,000 ($150,000 for joint and surviving spouse filers) would gain $300 per eligible child. Senate Bill S2238 would raise $93.3 million in state revenues in 2025. 32% of NYC residents would see their net incomes increase, including 40% of those in the bottom half of the household income distribution. A quarter of the NYC population would see their tax liability increase. Finally, the city’s poverty level, as measured by the SPM, would decrease, including a 2.0% reduction in child poverty.

As policymakers evaluate reforms such as these, analytical tools like PolicyEngine offer critical insights into the impacts on diverse household compositions and the broader economy.

We invite you to explore our additional analyses and use PolicyEngine to calculate your own tax benefits or design custom policy reforms.

david trimmer
Policy Research Fellow at PolicyEngine

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