By Cynthia Bauerly
Minnesota policymakers have long understood that Minnesotans are our greatest resource and that when we invest in our people, our state succeeds – economically and otherwise.
One way we invest in Minnesota families and workers is by providing tax benefits like the Working Family Credit and the Child and Dependent Care Credit. These credits reduce income taxes or increase refunds to help working Minnesotans pay for daily necessities or put some money aside for the future.
Gov. Mark Dayton and Lt. Gov. Tina Smith want to increase these credits and allow more families and workers to qualify. Their plan would help 450,000 Minnesotans with low-to-moderate incomes, reducing income taxes for those who need it most. For example:
- A single mom in Hopkins who earns $44,000 as a home health aide would receive $600 from the Child and Dependent Care Credit to help cover the $3,500 she spends on after-school care for her 8-year-old daughter. (She does not currently qualify for the credit.)
- A married teacher and machinist in Elk River who earn $48,000 and spend $10,000 on child care would receive $485 from the Working Family Credit – more than double their current credit – to help repair the car they need to get to work. They would also receive $1,200 from the Child and Dependent Care Credit to help pay for high-quality care for their infant son and 3-year-old daughter while they are working.
- A 24-year-old student in Duluth who earns $12,000 as a part-time retail worker would receive $196 from the Working Family Credit to buy supplies for a summer course that will help her graduate early. (She does not qualify for the credit under current law.)
- A single dad in Mankato who earns $34,000 as a school bus driver would receive $435 from the Working Family Credit. That’s $100 more than he receives now, allowing him to buy athletic shoes and clothing that his fast growing-teenage son needs for summer basketball camp.
These credits are powerful tools for reducing poverty and building an economy that works for all Minnesotans. And the money from these credits goes back into the community – on necessities like housing, school supplies and child care – which helps strengthen the state’s economy.
Working Family Credit
The Working Family Credit helps people earning low-to-modest wages, mainly working parents. These Minnesotans pay a larger share of their income in state and local taxes than people who earn more.
The Minnesota Budget Project recently noted the credit is especially helpful for people of color and rural workers, both of whom are more likely to hold lower-wage jobs.
The governor’s proposal would invest $94 million to extend the credit to 107,000 more households, save 260,000 families who already get the credit an average of $124 more per year, and for the first time, independent workers who are 21 to 24 years old could qualify for the credit.
Child and Dependent
The Child and Dependent Care Credit helps working families afford child care, one of the largest expenses in household budgets.
Minnesota has the fifth-most expensive child care in the nation. All-day care for a 4-year-old child is $952 per month, or $11,420 per year, on average. For an infant, the average cost is $1,235 per month, or $14,826 per year.
The governor’s proposal would invest $61 million to extend the credit to 95,000 more working families. The plan would also save 75,000 families who already get the credit another $379 per year, on average.
It’s time to update the Working Family Credit and Child and Dependent Care Credit, which are crucial for families who struggle to pay for housing, daily expenses or child care.
Boosting these credits helps these hardworking families across the state as they work toward a more prosperous future – an investment that pays off for all of us who live, work and play in Minnesota.
Cynthia Bauerly is commissioner of the Minnesota Department of Revenue.