Prioritizing Everyday Minnesotans in State Tax Decisions

Supporting Minnesotans' work efforts should be a priority in the state's tax and budget decisions. The Minnesota Budget Project supports expanding the Working Family Credit so that working people across the state can better make ends meet, and to get children off to a stronger start in life. Strengthening the Working Family Credit would also make Minnesota's taxes fairer.

Get Involved

Minnesota's elected officials are making decisions about whether to expand the Working Family Credit. Minnesota's younger workers would especially benefit from a boost to the Working Family Credit, and we encourage them to add their voices to this debate.

What's at stake

Every day, hard-working Minnesota families struggle to make ends meet. Tight family budgets make it hard for Minnesotans to pay for child care, education and training to build their skills, reliable transportation, and other things they need to succeed in the workplace and get ahead. 

Fortunately, there is a successful tax policy that focuses on working Minnesotans and their families. The Minnesota Working Family Tax Credit encourages and supports work, makes Minnesota's taxes fairer, helps working people across the state meet their basic needs, and gets children off to a stronger start. More than 330,000 households received the Working Family Credit in 2015, the most current year for which detailed information is available. That means more than 12 percent of all Minnesota households filing state income taxes benefit from the Working Family Credit.

The Working Family Credit effectively reaches those communities where good jobs are harder to find, including parts of Greater Minnesota and communities of color.

  • 49 percent of households receiving the credit live in Greater Minnesota.
  • map of minnesota percent of households receiving working family creditWhile people of color made up about 18 percent of the state's population, roughly 34 percent of those eligible for the credit in 2015 were people of color.

The Working Family Credit offsets a portion of the substantial state and local taxes, such as sales taxes, that lower-income working people pay.

The Working Family Credit is Minnesota's version of the federal Earned Income Tax Credit (EITC) and builds on the EITC's documented success in supporting work, reducing poverty, and improving the health and education of children.

There has been bipartisan interest at the federal level and increased attention in many states in improving EITCs for workers without dependent children. As they are currently structured, these tax credits don't do as much to support the work efforts of single people and married couples without dependent children - sometimes called "childless workers." That's because these workers receive tax credits that are very small; these workers lose eligibility for the tax credit at very low incomes (for example, a single Minnesotan working full-time, year-round, and earning the minimum wage makes too much to qualify); and arbitrary age requirements mean independent workers under age 25 cannot qualify.

Minnesota policymakers enacted legislation in 2017 that would allow workers without children to qualify for the Working Family Credit at age 21, which goes into effect in tax year 2019.

Minnesota also should make an overdue update to the Working Family Credit by providing a larger credit for families with 3 or more children. The federal EITC added a "tier" for these families in 2009, which recognizes that these families have higher basic expenses than smaller families. Minnesota still treats these families the same as those with two children, and is one of only two states with EITCs that hasn't yet adopted this change.

Status

The House omnibus tax bill (House File 2515) expands the Working Family Credit for currently eligible workers and families and makes more Minnesotans eligible. It particularly focuses on the two family types that are less well-served by the credit as it is currently structured: workers with no dependent children, and families with three or more children. The bill would increase the Working Family Credit by about $41 million a year through the following changes:

  • For workers without children, increase the maximum credit by $140 and the income limit to qualify to $22,673;
  • For families with one child, increase the maximum credit by $56 and the income limit to $42,324;
  • For families with two children, increase the maximum credit by $58 and the income limit to $48,086;
  • For families with three or more children, increase the maximum credit by $344 and the income limit to $50,810.

Income limits for households headed by married couples are about $5,800 higher than the limits shown above.

This proposal builds on multiple options to expand the Working Family Credit that were considered in the 2019 Legislative Session, including House File 1620 (Gomez) / Senate File 2507 (Rest), House File 1795 (Brand) / Senate File 2503 (Rest), House File 1825 (Loeffler) / Senate File 2506 (Rest), and Senate File 2501 (Rest) / House File 2564 (Loeffler).

In his proposed two-year budget, Governor Tim Walz recommends expanding the Working Family Credit by about $50 million a year through two policy changes:

  • Providing an expanded tax credit for families with three or more children. An estimated 46,700 families would benefit by an average of $227; and
  • Increasing the Working Family Credit by $100 for eligible households headed by a single person and by $200 for eligible families headed by a married couple.

More information

Staff contact: Nan Madden, Minnesota Budget Project Director, 651-757-3084

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