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.
Policymakers who authored legislation to expand the Working Family Credit during the 2019 Legislative Session included Representatives Jeff Brand, Aisha Gomez, Diane Loeffler, and Paul Marquart, and Senator Ann Rest. Governor Tim Walz also recommended expanding the Working Family Credit in his budget proposal.
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 315,000 households received the Working Family Credit
in 2017, 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.
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 these policy changes make?
With the expansion passed in 2019, 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.
The 2019 legislation 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 Minnesota had been one of only two states with EITCs that hadn't adopted this change.