Could California parents get hundreds more in tax credits? Here’s what Biden proposes
Could the expanded federal income tax child credit — which in 2021 meant hundreds of extra dollars for many California parents — be coming back?
President Joe Biden Thursday proposed restoring the extra credit, which ended in December 2021.
That would mean that qualifying families could get the full $3,000 annual credit for each child six to 17, and $3,600 for younger children. The current credit is $2,000 per child.
The expanded break, enacted during the COVID-19 pandemic as a way to help struggling families and sent to many taxpayers on a monthly basis, ended as COVID-19 relief programs were allowed to expire.
Democrats have continued to push to get it back. It “significantly decreased the number of children experiencing poverty across several race and Hispanic origin groups,” the Census Bureau reported. Nationally child poverty rates were nearly cut in half while the expanded credit was in effect.
Restoring the credit won’t be easy —many Republicans and some Democrats have been concerned it would help stoke inflation.
But the new White House initiative is a signal that expansion is likely to be part of a lengthy negotiation on how to fund the federal government in fiscal 2024, which begins October 1. Biden announced his proposal as part of his new budget plan.
If the expanded cut was in effect this year, this is the estimated average savings for qualifying California families, according to the Institute on Taxation and Economic Policy, a Washington research group:
▪ Less than $29,100 income (lowest 20%) ... $4,230
▪ $29,100 to $55,000 (next 20%) ... $2,810
▪ $55,000 to $92,200 (next 20%) ... $2,120
▪ $92,200 to $165,900 (next 20%) ... $2,180
▪ $165,100 to $407,000 (next 15%) … $1,880
In the 2021 expansion, the increase in the maximum amounts began to phase out for parents with adjusted gross incomes of more than $75,000 for single filers, up to $112,500 for heads of households and up to $150,000 or less for married couples filing jointly.
The credit was “refundable.” That meant that if the credit was larger than the amount of tax someone owed, the government would make up the difference.
If someone owed $600, for instance, and qualified for $3,000 in child care credits, the government would provide them with $2,400. Biden said Thursday he wanted to continue to make the credit refundable.
While supporters praised Biden’s initiative, the National Taxpayers Union had qualms.
The watchdog group has supported making the $2,000 credit, which is due to expire in 2025, permanent and expand it so it reaches more low income households.
But, said Andrew Lautz, director of federal policy, any expansion should be offset by spending reductions elsewhere.
Ultimately, he said, Republicans and Democrats are “going to need to come together” before the $2,000 credit expires.
Republicans criticized the broader Biden themes.
Sen. Charles Grassley, R-Iowa, top Republican on the Senate Budget Committee, viewed the budget differently. He noted Biden’s proposed tax increases on the wealthy, and found the overall budget “a road map to fiscal ruin.”
Biden, he said, “doesn’t seem to give a rip about keeping his promises or securing the fiscal health of our nation.”
This story was originally published March 9, 2023 at 12:36 PM.
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