Menu Search
duy-pham-704498-unsplash

Prioritizing everyday Minnesotans by expanding the Working Family Credit

The Minnesota Budget Project supports expanding the Working Family Tax 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 also makes Minnesota's taxes fairer.

What happened in the 2019 Legislative Session?

The 2019 omnibus tax bill expands the Working Family Credit by about $30 million a year, benefiting about 275,000 Minnesota households. This bill was passed by the Legislature and signed into law by Governor Tim Walz.

Many currently eligible workers and families will receive larger tax credits, and more Minnesotans will be able to qualify. The expansion particularly focuses on those workers and families that were less well-served by the credit as it was previously structured. Specifically, the bill makes the following changes:

  • For workers without children, increases the maximum credit by $140 and the income limit to qualify to $22,673;
  • For families with one child, increases the income limit to $41,392;
  • For families with two children, increases the income limit to $47,533; and
  • For families with three or more children, increases the maximum credit by $344 and the income limit to $51,110.
  • Income limits for households headed by married couples are about $5,800 higher than the limits shown above.

This proposal is similar to provisions in the House omnibus tax bill, and 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 also recommended expanding the Working Family Credit.

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. The Working Family Credit effectively reaches those communities where good jobs are harder to find, including parts of Greater Minnesota and communities of color. Nearly half of the households receiving the credit live in Greater Minnesota, and about one-third of those eligible for the credit are people of color.

map of minnesota percent of households receiving working family credit

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.

What difference will this year's policy changes make?

With this year's expansion, Minnesota joins a growing number of states that have improved their state EITCs for workers without dependent children. Historically, federal and state EITCs haven't done as much to support the work efforts of single people and married couples without dependent children, who have received very small tax credits, and lost eligibility for the tax credit at very low incomes - for example, until this year's change, a single Minnesotan working full-time, year-round, and earning the minimum wage made too much to qualify for the Working Family Credit.

This year, Minnesota also made an overdue update to the Working Family Credit by providing a larger credit for families with three or more children. The federal EITC provided a larger credit and higher income ceiling for these families in 2009, recognizing these families have higher basic expenses than smaller families, but until this year, Minnesota was one of only two states with EITCs that hadn't adopted this change.

Read more on this topic

Most recent blog posts

June 24, 2019

Final tax plan boosts tax credits for working Minnesotans, but falls short on future stability

The 2019 tax bill agreed to by Governor Tim Walz and the Minnesota Legislature in the recently completed special legisla...

May 17, 2019

All tax plans on the table raise revenues: the difference is how much and who benefits

The negotiations to reach a budget deal this session have at times been characterized as a debate between raising taxes...

April 08, 2019

Walz tax plan expands Working Family Credit, funds investments in schools and communities

Narrowly defined, the primary responsibility for policymakers this legislative session is to pass the state’s next ...

February 19, 2019

Governor Walz’s FY 2020-21 budget proposal makes important investments to build prosperity in Minnesota

In his release of his FY 2020-21 budget proposal today, Governor Tim Walz outlined his priorities for “One Minnesota” ...