Maine’s Dependent Exemption Tax Credit (DETC) is a vital investment in the state’s future. As Maine’s version of the child tax credit, it helps families with children or dependent adults afford essentials like food, rent, and childcare, especially in rural areas. By easing the burden of rising costs, the DETC strengthens Maine’s economy through local spending and enhances the well-being and economic security of children, shaping their future prosperity. It also supports caregivers in meeting basic needs, promoting long-term stability, better health, and improved educational outcomes, ultimately benefiting both families and society.
The DETC currently provides a tax credit of up to $300 for children and adult dependents.1 With LD 1294, Senate President Mattie Daughtry is proposing to double the DETC for children under 6 to $600. The proposal is revenue neutral — it pays for itself by phasing out the benefit for higher earners and recapturing those savings to give low- and middle-income families with young children a bigger benefit.
In addition to having a significant impact on families and children with low income, many of whom live in rural Maine, expanding the DETC will benefit caregivers, families, and the broader economy:
- Families with young children often have lower incomes and higher poverty rates than households without children because they must balance caregiving responsibilities with earning income.2 Child tax credits help caregivers meet basic needs, easing financial stress and reducing the psychological strain of poverty.
- Children in families with low income face a higher risk of food insecurity, unstable housing, and trauma, which can negatively impact their health, education, and overall well-being. Early childhood is a crucial period for cognitive and emotional development, and research links poor nutrition and severe stress during this time to worse health outcomes later in life.3
- Child tax credits benefit both families and society by increasing future earnings, improving health and education outcomes, and reducing criminal justice involvement for children it supports. It also helps families stay connected to the workforce, strengthens Maine’s communities and economy through greater long-term stability, and builds a more resilient society by enhancing economic security.4
The American Rescue Plan Act expanded the federal child tax credit during the COVID-19 pandemic, cutting child poverty nearly in half.5 However, this expansion expired in 2022. Research shows families in Maine used the funds to cover basic needs such as food, utilities, housing, clothing, and education.6
In recent years, Maine has made other changes to its DETC to make it more equitable. This year, for the first time the DETC will be fully refundable on 2024 tax returns, allowing about 50,000 families that include 73,000 children and 35,200 adult dependents to receive the full credit and use the money for essential expenses. Starting in 2025, the benefit amount will be tied to inflation, so it will increase over time and not lose its value. Starting in 2026, Maine’s DETC will also be available to families with dependents regardless of any changes to the federal child tax credit.
Expanding Maine’s DETC builds on successful state and federal policies that have demonstrated the effectiveness of tax credits in reducing child poverty and supporting working families. Similar credits, such as the federal child tax credit, have been shown to move millions of children out of poverty and improve family financial security.7
The Legislature has an opportunity to expand on its commitment to Maine children and families by continuing to improve this tax credit and focusing its benefits on the people who need it most. Currently, joint filers making up to $440,000 are eligible to receive partial credit, but the greatest impact is on families with low and moderate income. Lowering the phase out threshold would help ensure the benefits of this policy are even more targeted to Mainers who need it most.
This common-sense policy is attracting bipartisan support. It has mostly been a Democratic priority but the idea is gaining traction in Republican-led states including Ohio and Indiana.8 The proposal in Maine has attracted bipartisan co-sponsors.
Soaring costs for housing, child care, and groceries are making it harder for Maine families to stay afloat. The state can step up by expanding the DETC for kids under 6 — because little feet come with big expenses. This smart, targeted investment puts money where it matters, giving families with low and middle income a real break while setting the youngest Mainers up for a brighter future.
The table below shows the current phase-out structure for the DETC alongside the proposed changes in this bill. This shows how benefits under this proposal would be more concentrated on families with low and middle income.
Notes
[1] Maine Revenue Services, Dependent Exemption Tax Credit.
[2] Waxman, Samantha and Iris Hinh. “States Can Enact or Expand Child Tax Credits and Earned Income Tax Credits to Build Equitable, Inclusive Communities and Economies.” Center on Budget and Policy Priorities. 3 March 2023.
[3] The National Academies of Science, Engineering, and Medicine. A Roadmap to Reducing Child Poverty. 2019.
[4] Hamilton, Leah et. al. The impacts of the 2021 expanded child tax credit on family employment, nutrition, and financial well-being. Brookings. 13 April 2022.
[5] Hughes, Joe. “Census Data Shows Need to Make 2021 Child Tax Credit Expansion Permanent.” Institute on Taxation and Economic Policy. 14 Sept 2022.
[6] Small, Sarah. “How the Child Tax Credit was spent in Maine.” Maine Center for Economic Policy, May 2022.
[7] Davis, Aidan. “State Child Tax Credits and Child Poverty: A 50-State Analysis.” Institute on Taxation and Economic Policy, 16 Nov 2022.
[8] Hardy, Kevin. “Red States Embrace the Idea of Child Tax Credits.” Governing, 20 March 2025.
