MN families could net $3,000 per child under proposed tax credit

Have a kid? Have a tax credit.

That’s the basic principle behind HF1369, a bill sponsored by Rep. Carlie Kotyza-Witthuhn (DFL-Eden Prairie) that, as amended, would establish a refundable child credit.

It would equal $3,000 for each qualifying child age 0-5 and $1,000 for each qualifying child age 6-17. The credit would be phased out based on the taxpayer’s income.

On Thursday, the House Taxes Committee laid the bill over for possible omnibus bill inclusion.

“Many of us are familiar with the federal child tax credit that was in place through December of 2021 through the American Rescue Plan,” Kotyza-Witthuhn said. “It made an amazing dent in childhood poverty. Without this renewed funding at the federal level, families were reporting difficulty paying for food and child care in the months immediately following that program’s end. So now several states are considering implementing or expanding a state tax credit.”

Rep. Carlie Kotyza-Witthuhn

The Department of Revenue estimates that, in tax year 2023, about 573,300 returns with 1.1 million eligible dependents would claim an average credit of $3,209 per return. And the bill’s provisions would decrease the General Fund by $2.29 billion in fiscal year 2024 and $1.84 billion in fiscal year 2025.

“There is no doubt that this would be a costly endeavor,” Kotyza-Witthuhn said. “But I believe, and research shows, that there is no better return on investment than in Minnesotans and their families.”

In an unusual feature for proposed tax credits, the bill would require the Department of Revenue to establish a process through which taxpayers could receive up to six advance payments of the credit.

The credit would be phased out by 10% of adjusted gross income in excess of $150,000 for married joint returns, $112,500 for head of household returns, or $75,000 for other returns.

Debra Fitzpatrick, policy and research director for Children’s Defense Fund Minnesota, said the tax credit would reduce child poverty in Minnesota by 25%.

Rep. Chris Swedzinski (R-Ghent) unsuccessfully proposed an amendment that would extend the credit to “an unborn child with a gestational age of at least 28 weeks as of December 31 of the previous taxable year.”

“When your kids are little, that’s the time in your life, research shows, that you have the least savings and the lowest income you’re ever going to have and the worst credit scores you’re ever going to have,” said Rep. Dave Pinto (DFL-St. Paul). “That’s the time when this could really make an impact.”

But Rep. Andy Smith (DFL-Rochester) has reservations.

“I just think that $4 billion gives us a lot of services, gets us closer to universal health care. As we look at the larger tax omnibus, this is going to be a huge price tag.”

Rep. Greg Davids (R-Preston) agreed about the latter point, but discouraged committee members from dismissing bills for sporting too large a dollar figure.

“I hope our committee will be hearing all bills for what they are,” he said. “We know it’s not going to be at this price. We have a lot of funds, but there’s going to be a lot of competition.”