The Trump campaign is doing it. The Harris campaign is doing it. And Colorado is doing it.

Are Child Tax Credits the way to reduce poverty and put more Americans on the ladder to economic prosperity? It might be too soon to tell, but the Colorado investment is a sign that state lawmakers believe the credits are the solution.

In this last legislative session, legislators passed HB24-1311, the Family Affordability Tax Credit bill. This bill includes a Child Tax Credit (CTC) program similar to the temporary federal CTC offered in 2021 as part of the American Rescue Plan Act.

The true test of these measures will be whether they can break cycles of poverty by strengthening the incentive to work, rather than simply elevating some people’s incomes above the statistical poverty line.

According to a recent Common Sense Institute study, low-income families in Colorado are set to receive substantial boosts to their household finances following state and federal tax reforms. Between 2021 and 2025, Colorado’s spending on child tax credits and earned income tax credits to support lower income workers and families will grow from $97 million to $1.1 billion. This amounts to a 6% increase in the state’s general fund expenditure, given that the credits are funded by TABOR refunds. Federal spending on CTC and earned income tax credits is in addition to this amount.

At the federal level, child tax credits continue to be touted as a key component of America’s safety-net programs and essential to lifting children out of poverty. The ARPA temporary expansion of CTC received wide attention because of its purported impact on child poverty. The temporary bill increased the CTC to $3,600 per child under 6 years old and $3,000 per child ages 6-16 years old. Also, the eligibility for the tax credits was expanded to include all families up to $210,000 annual household income. Half the funds were distributed monthly from July to December, with the remainder as a lump sum after filing taxes. This federal program is said to have lifted 2.9 million children out of poverty based on the Federal Poverty Level. Proponents of Colorado’s Family Affordability Tax Credit estimate the CTC will cut child poverty in half.

What does it mean to move a family out of poverty? For reference, the FPL for a two-person household is an annual income of $20,440 and $25,820 for a three-person household. The Institute on Taxation and Economic Policy estimates that to cut child poverty rates in half, states would require a CTC of between $3,000 and $4,500. Colorado’s Family Affordability Tax Credit will create a tax credit of a maximum of $3,200 for children under 6 years old and $2,400 for children 6-16 years old, so within the realm estimated by the Institute on Taxation and Economic Policy. If it would only cost between $3,000 and $4,500 to move a family out of poverty. Why wouldn’t we do that?

The American Rescue Plan Act temporary expansion in 2021, which went to 650,000 Colorado families with nearly 1.1 million children, is said to have created a reduction in food insecurity as 51% of families in our state used the monthly payments for food. Families also used the money for school-related expenses, clothing and other essential items for children. The monthly payments were helpful for many households, particularly those led by single mothers who were more likely to have lost their jobs during the pandemic. Overall, families reported less financial hardship, including decreased credit card debt and a greater ability to pay for utilities. However, when the payments were over, families struggled again. That’s the problem. The CTC is a temporary fix to poverty.

Additionally, there is a distinction between moving above the federal poverty line and moving into self-sufficiency. How might we create a more long-term approach to moving children out of poverty that allows families to use the supplements provided by tax credits to improve their financial situations in sustainable ways?

Because financial scarcity creates time scarcity, CTC could help decrease the barriers to work that come from challenges related to monthly budget pressures. When every dollar is allocated to expenses before it is earned, most people struggle to take time off or invest in education or training to improve their work prospects.

Another concern is within the structure of the Family Affordability Tax Credit CTC, families who earn the least will receive the most tax credit. As income increases, the tax credits decline incrementally, phasing out at incomes of $85,000 per year. Yet, there are studies that show that earned income tax credits, another tax credit program for low- and moderate-income tax filers, improves labor force participation. There is less evidence about the impact of CTC on work, but it will be important for Colorado to study labor force participation for those receiving the Family Affordability Tax Credit child tax credits. Is work impacted in a positive or negative way? We will need to find out.

Finally, the funding of the Family Affordability Tax Credit is precarious because it uses TABOR refunds as its source. The program is expected to cost $730 million in the 2025 tax year, assuming a 75% utilization rate. However, in future years, the funding will be dependent on the anticipated TABOR surplus, meaning that in a year in which there are no expected TABOR refunds, the credit would not be available. This poses risk to the availability of the CTC in future years and the impact it could have on child poverty if receiving the CTC had a compounding effect on families. If we are able to demonstrate through study that this Family Affordability Tax Credit positively impacts families living in poverty and does not decrease work, funding the credits in a sustainable way makes sense.

Based on the impact of the American Rescue Plan Act CTC, I think the new Colorado CTC is worth a try. Children who grow up in poverty tend to earn less and pay less in taxes as adults. Almost half of adults who experienced moderate to high poverty levels in childhood are poor in early to middle adulthood. In the U.S., the annual cost of childhood poverty is between $500 billion and $1.03 trillion. An investment in children is a collective investment in all our futures.

Tamra Ryan is the CEO of Women’s Bean Project and a Common Sense Institute Coors Economic Mobility Fellow.