Tax credits for working Minnesotans an important area of common ground

Nan Madden
Nov 23, 2016

The long election season that just concluded shone a spotlight on the economic insecurity facing many across our state and across the country.

Policymakers must respond with effective and targeted strategies so that Minnesotans can support their families and get their kids off to a better start. In terms of tax strategies, Minnesota policymakers have two such solutions close at hand: the Working Family Tax Credit and the Child and Dependent Care Tax Credit make everyday Minnesotans a priority, and they are part of the unfinished business from the last session. (These credits were included in the 2016 tax bill that passed a divided Legislature with strong bipartisan support; unrelated technical glitches in the bill found after the legislative session was over prevented Governor Mark Dayton from signing it into law.)

The Working Family Credit (WFC) is a tax credit for working people with lower incomes, which helps them meet basic needs and support their families. It is our state’s version of the federal Earned Income Tax Credit, or EITC, which has a proven track record of supporting work, boosting incomes and getting children off to a stronger start in life. It is available to households with earnings from work, and the amount of the credit varies based on the size of the family.

The Working Family Credit is effective in reaching many of those Minnesotans who, despite working hard, are struggling to make ends meet, and the expansion proposal would make it work even better.

  • Nearly half of the families and workers who currently get the Working Family Credit live in Greater Minnesota, where wages tend to be lower and job opportunities can be more limited than in the Twin Cities metro area. In several counties in Greater Minnesota, more than 1 out of every 6 tax-filing households receive the Working Family Credit.
  • The Working Family Credit is also effective in reaching Minnesota’s communities of color, who also have had less access to opportunity. About 30 percent of those estimated to be eligible for the WFC are people of color.
  • The expansion would make the credit work better for younger workers and others who aren’t raising children in their homes. It includes reforms inspired by proposals from House Speaker Paul Ryan and President Barack Obama for the federal EITC to have the same kind of pro-work impact on these workers that it has for parents. Workers without dependent children can already qualify for the credit, but currently, these workers face an arbitrary age requirement that they be at least 25 years old, and single Minnesotans working year-round, full-time at $9.00 an hour make too much to qualify.

The Child and Dependent Care Credit also supports struggling working families. It is intended to help families afford child care, but the credit hasn’t kept up with rising costs. This is another credit that has received bipartisan support and ongoing interest; it has been a feature of Dayton’s budget proposals, and expansions have passed the Republican-led House in both 2015 and 2016. Expanding this credit is another good step, along with boosting funding for child care assistance, in making sure Minnesota parents can afford child care and employers can attract the workers they need.

In the 2017 Legislative Session, we are likely to face a tighter state budget situation, and at the same time, too many Minnesota families are struggling. That makes it even more essential to focus on proven and well-targeted strategies to boost the incomes of working Minnesotans. The Working Family Credit and Child and Dependent Care Credit deserve to be top priorities.

-Nan Madden