Expanded child care credit could ease parents’ burden, bill’s supporters say

Say you’re a young worker looking for a place to settle down and start a family. Is Minnesota appealing? Would it help if you got a refundable tax credit on your student loans? How about an expanded tax credit for child care expenses?

Those are some of the ideas being floated in the House Taxes Committee this week. But, in the case of an expanded child care credit, the motivation wasn’t only attracting new workers, but making life more affordable for the ones we have.

Procuring and paying for child care was described as a crisis situation by testifiers before the committee on Thursday. They spoke in support of HF3283, a bill sponsored by Rep. Carlie Kotyza-Witthuhn (DFL-Eden Prairie) that would more than triple the size of the tax credit for dependent care.

The bill would also increase the maximum credit rate to 50% (from the current 30%) and increase the income-based phaseout to $125,000 of adjusted gross income. The maximum amount of expenses eligible for the credit would be increased to $10,000 for families with one child under age 5, $20,000 for two, or $25,000 for three children or more.

Rep. Carlie Kotyza-Witthuhn

The bill, as amended, was laid over for possible omnibus bill inclusion. It has no Senate companion.

The Department of Revenue estimates that about 156,700 tax returns would be affected by the change in tax year 2022, with an average decrease in tax of about $1,300. It also estimated the bill would cost the General Fund $203.5 million in fiscal year 2023.

“Before COVID-19 hit, we knew that our child care system was broken,” Kotyza-Witthuhn said. “Parents can’t afford to pay more for care, early childhood educators and child care providers are struggling to support their own families on low wages, and the pandemic has exacerbated all of these issues. There are myriad families across the state of Minnesota who pay as much as, or even twice as much as, their mortgage payment in child care. A tax cut to help these families pay for child care puts money back in their pockets.

“In addition, we’re facing a critical workforce shortage. We’ve seen a disparate number of women leave the workforce in order to care for their children. The Great Start child care tax credit says to families with young children, ‘You’re welcome in Minnesota. We want you to live, work and raise your families here, and we will help you do it.’”

Committee members’ questions centered upon such issues as whether stay-at-home parents could benefit (yes, for children under age 1, Kotyza-Witthuhn said), and if day care providers could qualify if they have their own children in their care (yes).

“This is really an economic issue,” said Rep. Cheryl Youakim (DFL-Hopkins). “Recently, the Minnesota Chamber [of Commerce] members were surveyed, and 62% of them said child care shortages were an important issue with their employers. It was an issue with hiring employees, and with growth for their own businesses. … And there’s been a national survey saying that, if we just lower the price of child care 10%, you will get an increase of 11% in just maternal women moving back into the workforce. That doesn’t even include all parents going back into the workforce.”

“Part of this bill’s goal is to drive people out of the home and into the workforce,” said Rep. Chris Swedzinski (R-Ghent). “There is value that a parent is in the home helping to raise children by passing on beliefs, passing on work ethic. There is value in that beyond people just being able to be employed by our corporations and businesses.”