Biden, Democrats want to increase tax breaks for parents. It could help 15 million Californians

Brea Turner struggles to keep up with rising prices. She struggles to pass her college classes, raise her young daughter and work at her part-time job.

The California State University-Sacramento student said she still needs the COVID-era child tax credit, which was expanded to ease financial hardships for families during the pandemic. That enhanced benefit ended last year.

But Washington lawmakers are seriously considering returning it to its 2021 level, when qualifying parents could receive monthly payments of up to $300 and annual tax breaks of up to $3,600 per child.

Today, the credit is no longer paid monthly and is worth a maximum of $2,000 per year per child. Parents such as Turner feel the difference.

“The child tax credit we received in 2021 was super helpful with keeping our refrigerator stocked and our daughter clothed,” the community health education major said.

Her husband works 60 hours a week to help support Turner and their daughter. Brea Turner works part-time at the health center on campus.

“Even with my husband working as much as he does, we still struggle to find money for food and living expenses occasionally,” she said.

The increased tax credit would help an estimated 14.7 million Californians, according to the Institute on Taxation and Economic Policy, a progressive Washington-based research group.

While the proposed increase has a long way to go legislatively, and is likely to change, it’s one of several tax cuts under serious discussion.

President Joe Biden and Democratic leaders have long sought to increase the credit. Many Republicans like the idea because it helps promote families.

“There is a bipartisan base of support, not only for the credit itself but expanding it,” said Pete Sepp, president of the National Taxpayers Union, a watchdog group. “From the rhetoric, you would think the two parties are far apart but it’s more a matter of feet than miles.”

Some sort of parents’ tax break “would be achievable at the end of the year,” said Rep. Richard Neal, D-Mass., top Democrat on the tax-writing House Ways and Means Committee.

The biggest obstacles are cost and questions about whether it’s the best way to deliver relief to people who need it most.

Rep. Darrell Issa, R-Vista, wants to lift the limit on deductions for in state and local tax payments, referred to as the SALT issue. It was capped at $10,000 in 2017 and many California lawmakers have been pushing to repeal the provision ever since.

There’s been a lot of resistance to lifting the cap from lawmakers in less wealthy states, as they say doing so would provide a tax break for higher-income earners.

Asked about the child credit, Issa kept returning to how important it was to restore the SALT break.

“My goal is to return the SALT deduction that should never have been taken away,” he said.

Supporters of the expanded credit say there are many ways to make up the lost revenue.

“There are plenty of tax loopholes that can be closed,” said Rep. John Garamendi, D-Walnut Grove, a co-sponsor of the House legislation along with Democratic Reps. Ami Bera and Doris Matsui of Sacramento.

Tax help for parents

Turner said the recent financial strain has left her unable to pass all her classes. Rising prices have been particularly painful, as salaries just haven’t kept up.

“If the child tax credit went back to how it was in 2021 I would be able to stress less about putting food on the table and spend that time studying for my degree.,” Turner said.

Turner benefited when the child tax credit was expanded during the COVID pandemic. In 2021, a parent could deduct up to $3,600 a year for children under 6 and $3,000 for those 6 to 17. During the last six months of that year, they could receive the credit as a monthly payment.

The maximum increases 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.

People in lower brackets were helped enormously. Child poverty rates were cut nearly in half.

The Census Bureau found that the credit “significantly decreased the number of children experiencing poverty across several race and Hispanic origin groups.”

In 2022, the credit returned to its previous level of $2,000 per child for qualifying taxpayers, and 17-year-olds are no longer eligible.

The Senate version and the House version of the revived increase would restore the 2021 levels. They would also make the credit “refundable.” That means if the credit was bigger than the amount of tax someone owed, the government would make up the difference.

The tax-writing House Ways and Means Committee approved a package of cuts last month, but did not include the child care plan. Democrats are unlikely to accept any such package without that, so negotiations are expected to continue throughout the summer.

If the Democratic plan went into effect, virtually all those benefiting would be taxpayers with incomes of less than $155,100, according to the Institute on Taxation and the Economic Policy, a progressive research group. It estimated this impact of the expanded credit on California households in 2024:

▪ Bottom 20%. Incomes of zero to $27,700. Average savings of $4,500.

▪ Next 20% of incomes, $27,700 to $53,900. Average savings of $3,130.

▪ Middle 20% of incomes, $53,900 to $96,100. Average savings of $2,490.

▪ Next 20% of incomes, $96,100 to $155,100. Average savings of $2,450.