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Minnesota Gov. Tim Walz made headlines with his groundbreaking child tax credit policy. Here at Extreme Investor Network, we’re here to break down how Minnesota’s child tax credit stacks up and what it means for your personal finances.
Minnesota’s Generous Child Tax Credit
Described as a “signature accomplishment” by Governor Walz, Minnesota’s refundable child tax credit was the largest in the country for low earners at $1,750 per child for 2023. This credit begins phasing out at $29,500 for single filers or $35,000 for married couples filing jointly, with the complete phaseout dependent on factors such as the number of children, family income, and filing status.
According to Jared Walczak, Vice President of State Projects at the Tax Foundation, “Minnesota’s new child tax credit is unusual in its narrowness, but is the most generous in the nation for low-income households.” In 2023, over 215,000 Minnesota tax returns claimed the credit for more than 437,000 eligible children, resulting in an average tax break of $1,244 per child.
For tax year 2024, eligible Minnesota families can opt to receive 50% of the credit before the tax season through advance payments. This policy mirrors the successful federal child tax credit advance payments implemented in 2021, which helped reduce the child poverty rate to a historic low.
How Walz Could Shape Federal Policy
Walz’s child tax credit upgrades were a key priority in his latest supplemental budget and could potentially influence federal child tax credit policies. However, enacting federal changes may pose challenges depending on the political landscape in Congress.
Richard Auxier, a principal policy associate for the Urban-Brookings Tax Policy Center, notes that while state policymakers like Walz can influence federal policy, the process is complex and depends on various factors. In Minnesota, the child tax credit was enacted by a Democratic-controlled state legislature, highlighting the differences between state and federal policymaking.
Despite bipartisan support for an expanded federal child tax credit, recent efforts were blocked by Senate Republicans, underscoring the complexities of passing federal legislation. President Biden and Vice President Harris remain committed to fighting for an expanded child tax credit at the federal level.
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