2014 session starts with a bang for Working Family Credit

One of our top priorities for this legislative session is off to a great start.

On Tuesday, the first day of the 2014 Legislative Session, I testified at a House Tax Committee hearing in support of updating the Minnesota Working Family Credit to match improvements to its federal counterpart, the Earned Income Tax Credit (EITC). This provision was part of four different House bills that got a hearing on Tuesday, with authors from both parties, including:

The Earned Income Tax Credit is available only to people who work. It helps working families to better get by on low wages, and it encourages the lowest-earning families to work more hours. Twenty-five states as well as the District of Columbia have similar credits based on the EITC.

The Working Family Credit also makes Minnesota’s tax system more fair, and it offsets a portion of the state and local taxes that low- and moderate-income working families pay. The credit is calculated based on a household’s earnings from work, and the number of children in the family.

The federal government has adjusted the EITC to reflect the larger size of families headed by married couples, which addresses what’s called a “marriage penalty”. With Minnesota in a stronger financial situation, now is a good time for us to fully conform to those federal marriage penalty provisions. Conforming to those federal changes will make things simpler and less confusing for Minnesota taxpayers, and nearly 54,000 Minnesota working families would benefit.

This action to simplify the tax code and support Minnesota families has a modest cost of about $18 million per year. It’s a small improvement that will make a big difference for many Minnesota families.

The Working Family Credit provision was passed by the House Tax Committee on Thursday as part of House File 1777. This bill includes a number of federal conformity provisions (which update the state’s income tax code to match federal income tax changes) and provisions to repeal three business-to-business sales taxes.

Over in the Senate, updating the Working Family Credit to address marriage penalties was introduced Tuesday as Senate File 1841 authored by Senator Ann Rest. Later that day, Senate Majority Leader Tom Bakk expressed support for improving the Working Family Credit as part of his remarks at the Rally to Raise the Wage. As we’ve noted elsewhere, an increase in the minimum wage and an increase in the Working Family Credit work well together to promote economic security in Minnesota.

And Governor Dayton reiterated that increasing the Working Family Credit is one of his priorities for session in remarks to the media.

We’re glad to see this session is starting with a strong commitment to further making progress on a tax system that works for Minnesota’s working families.

-Nan Madden

This entry was posted in Taxes and tagged , , . Bookmark the permalink.