Dayton Details Child Care Tax Credit He'll Have In Budget

ST. PAUL, Minn. (AP) — Flanked by families, Gov. Mark Dayton proposed Tuesday expanding a child and dependent care tax credit to 92,000 more Minnesota families who could see hundreds of dollars in savings per year.

The Democratic governor previewed what he's calling a priority piece of his upcoming budget proposal that will be released in full next week. The amped-up credit would cost Minnesota's treasury $100 million over two years — and rise in years to come — and is among a slew of tax-cut plans cropping up in the Legislature, given the state's $1 billion surplus.

As Dayton rolled out his proposal, the House Tax Committee was debating a bill to reduce income tax rates for thousands of business owners. He drew a contrast between the approaches.

"That's directed toward businesses, which are increasingly profitable," he said. "Mine's directed toward families, who are increasingly hard-pressed by the economics of child care."

Michelle Steffan said her family is one of them. The mother of a three-year-old and an infant, Steffan said she and husband decided it made financial sense for her to stay home after the birth of their second son because her pay as a part-time physical therapist wasn't enough to cover the added child care expenses.

"It was exactly what I was making for salary," she said. "I love what I do but I figured if I was going to be working in order to put my children in daycare, it seemed that maybe I should spend a year or so with them."

Steffan said a $1,200 tax break would allow her to ease back into the workforce.

If Dayton gets his way, the income limit for the tax-credit eligibility would be raised from a current cap of $39,000 to $124,000 for families with two or more children. The average credit would be $481 and top out at $2,100, though the exact amount would be calculated based on income and care expenses.

Currently, about 38,000 families qualify for the credit.

House Republicans have said they are open to an expanded credit, but they're also pursuing the business breaks that would compete for cash. Senate Minority Leader David Hann, R-Eden Prairie, said his caucus would likely be on board with Dayton's tax credit proposal.

"It's a good start. We'd like to see more of that," he said.

Families that pay for dependent care for an ill or elderly family member also would qualify under Dayton's plan, and he's hinted his forthcoming budget would have additional subsidies for low-income families that rely on those for day care tuition.

While Dayton's plan concentrates on younger families, other tax proposals put people in the twilight of their lives at the forefront.

Senate Republicans on Tuesday introduced their own tax idea: phasing out the state's Social Security income tax over the next 10 years. Senators argued that Minnesota's status as one of just seven states to fully tax that income is making retirees flee elsewhere.

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