California families could save thousands of dollars from proposed child tax break. Here’s why

President Joe Biden’s child tax credit plan would benefit millions of California parents, saving eligible families an average of $2,980, according to data from Washington’s Institute on Taxation and Economic Policy.

Biden on Monday proposed reinstating the credit available to qualifying parents during 2021, when it was aimed at easing the economic pain triggered by the Covid pandemic. The credit, which became an important way of lifting millions of children out of poverty, could benefit 8.1 million adults and 6.7 million children in California, ITEP estimates.

Monday’s proposal was part of Biden’s $7.3 trillion budget proposal for fiscal 2025, the 12 month period that begins Oct. 1. Though most of that budget is dead on arrival in Congress, the child tax credit has had bipartisan support.

A boost in the child credit, a less generous plan than Biden proposes, has already been approved by the Republican-led House and is pending in the Senate.

Currently, qualifying families can take a $2,000 per child credit for children under 17. Taxpayer income must be less than $200,000 for a head of household filers and $400,000 for joint filers for the full credit. The Biden plan would boost the credit to $3,600 per child under six and $3,000 for children six to 17.

How big is the credit?

According to ITEP, a liberal research group, the Biden increase would mean these benefits to California taxpayers getting help from the Biden plan. First figure is income range, then average tax break.:

▪ Up to $27,700 of income (lowest 20% of earners)....average tax break of $4,500

▪ $27,700 to $53,900 (next 20%) ….average tax break of $3,130.

▪ $53,900 to $96,100 (middle 20%), $2,490.

▪ $96,100 to $155,100 (next 20%), $2,450.

▪ $155,100 to $372,900 (next 15%), $1,890.

The plan faces significant obstacles. Any tax change will probably need to be offset by spending cuts or tax increases, and is likely to be part of a broader budget package.

House Republicans sent strong signals Monday that the overall package Biden proposed Monday has big flaws.

“House Republicans reject Biden’s misguided budget proposal,” Speaker Mike Johnson of Louisiana said in a statement.

One of the key GOP objections is that Biden’s budget spends too much and seeks tax increases to help offset tax breaks.Among the tax hikes the president proposes are a higher minimum tax on wealthy corporations and a minimum tax on billionaires.

Could this become law?

There is hope that a change in the child tax credit can move separately. In January, the House passed a boost as part of a massive tax cut bill, a proposal that is now being considered by the Senate.

The House plan would benefit an estimated 2 million California children in lower income families, according to Washington’s Center on Budget and Policy Priorities. It’s paid for partly by changes to a Covid-era break for businesses.

That measure would make it easier for lower income families to qualify for the credit,

While the credit would stay at $2,000, it would be partly refundable., That means if if someone lacks the tax liability or has too little income to get a credit subtracted, they can get a tax refund.

Under current law, families can get as much as $1,600 as a refund. The House bill would boost that up to $1,800 on last year’s taxes, which are due in April, $1,900 this year and the maximum $2,000 credit next year.

Qualifying families earning less than $27,700 could see an increase in the average tax credit of $1,040 next year , according to estimates from another budget watchdog, the Institute on Taxation and Economic Policy, a progressive Washington research group.

Those with incomes between $27,700 and $53,300 could see a $500 jump in their credit.

This story was originally published March 11, 2024 at 1:06 PM with the headline "California families could save thousands of dollars from proposed child tax break. Here’s why."

David Lightman

McClatchy DC

David Lightman is a former journalist for the DCBureau