Minnesota Gov. Tim Walz, seen in Washington, D.C., on July 3, 2024, and Vice President Kamala Harris, seen in Washington, D.C., on July 22, 2024.
Jim Watson, Chris Kleponis | AFP | Getty Images
How Minnesota’s child tax credit stacks up
Described by Walz as a “signature accomplishment,” Minnesota’s refundable child tax credit was $1,750 per child for 2023, which was the biggest in the country for low earners. The credit begins phasing out at $29,500 for single filers or $35,000 for married couples filing together. The complete phaseout depends on the number of children, family income and filing status.
“Minnesota’s new child tax credit is unusual in its narrowness,” said Jared Walczak, vice president of state projects at the Tax Foundation. “But it is the most generous in the nation for low-income households.”
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For 2023, more than 215,000 Minnesota tax returns claimed the credit for over 437,000 eligible children with a total average tax break of $1,244 per child, Walz reported last week.
“This year, we invested directly in the financial security and well-being of families across the state through our nation-leading child tax credit,” he said in a press release.
For tax year 2024, eligible Minnesota families can soon choose to receive 50% of the credit before the tax season via advance payments. A similar policy was enacted for the federal child tax credit in 2021, which reduced the child poverty rate to a historic low of 5.2% that year, according to a Columbia University analysis.
How Walz could shape federal policy
As a key priority for Walz, Minnesota’s child tax credit upgrades were the single biggest line item in his latest supplemental budget. The policy could resurface to support an expanded federal child tax credit on the presidential campaign trail. But enacting federal changes could be more challenging, depending on which party controls Congress, experts say.
“It’s really hard to draw straight lines from any state policymaker to federal policymaking,” said Richard Auxier, a principal policy associate for the Urban-Brookings Tax Policy Center who focuses on state and local tax policy.
In Minnesota, the child tax credit was enacted via a Democratic-controlled state legislature, along with a significant budget surplus, which is different from the federal climate, he said.
Still, while Walz enacted state tax breaks like other governors, “he was able to turn the dial up a few extra notches,” Auxier said. “The child tax credit is probably the most obvious example.”
Walz’s office did not immediately respond to CNBC’s request for comment.
Despite bipartisan support for an expanded federal child tax credit, Senate Republicans blocked the measure earlier this month to defer negotiations.
Sen. Mike Crapo, R-Idaho, the ranking member of the Senate Finance Committee, in a statement described the vote as a “blatant attempt to score political points.” He said Senate Republicans have concerns about the policy, but are willing to negotiate a “child tax credit solution that a majority of Republicans can support.”
If enacted, the bill would have improved access to the child tax credit and retroactively boosted the refundable portion for 2023, which could have triggered refund checks from the IRS.
National Economic Advisor Lael Brainard said in a statement that President Joe Biden and Harris will “continue to fight for an expanded child tax credit.”