Support in place for proposed Montana child tax credit

Blair Miller

(Daily Montanan) The governor’s policy director and the bill sponsor said Thursday they would be open to including a phase-out at a slightly higher income level in their measure that would provide a $1,200 tax credit for each Montana child ages 5 and under.

The child tax credit is one of the major proposals from Republican Gov. Greg Gianforte’s administration which has received vocal support from members of both parties. The bill that would implement the credit, House Bill 268, sponsored by Fort Benton Republican Rep. Josh Kassmier, saw its first hearing of the session Thursday in the House Taxation Committee.

No one testified in opposition to the proposal. But several people who testified as proponents, as well as a handful of Democrats on the committee, said they hope it is part of a larger effort from the administration aimed at better addressing the costs and scarcity of child care in the Treasure State.

“With the costs of raising a child getting more expensive, a targeted child tax credit helps families cover things like diapers, food and other daily expenses,” said Rose Bender, with the Montana Budget & Policy Center. “That said, a state child tax credit is not a substitute for a state investment in child care.”

The proponents of the bill ranged from Gianforte’s policy director Glenn Oppel, to the Montana Family Foundation, Montana Women Vote, the Billings Chamber of Commerce, the Montana Catholic Conference and the Montana Budget & Policy Center.

All who testified agreed that providing a state child tax credit would put needed money into the pockets of families with young children amid soaring costs of living and child care in Montana – something the federal child tax credit expansion boosted in 2021.

Bender said if the federally expanded credit had been made permanent, like some in Congress have called for, it could have lifted 45% of all Montana children and 59% of American Indian and Alaskan Native children in Montana out of poverty.

But since that did not happen, Montana is now aiming to join 12 other states that have put their own state child tax credits in place. Bender said 10 others have introduced legislation to create or expand the credits.

The bill, as introduced, would give a parent $1,200 for each child they have ages five and under if they make $50,000 or less each year as long as they have no tax liability. If they do, that tax liability would be first taken out of the $1,200, and that person would see the rest of the money. The credit is refundable, unlike the federal child tax credit.

Oppel said the Governor’s Office sees the credit as a way to “empower parents that are best for their family” when it comes to who is providing child care and what the credit would be spent on.

Jeff Laszloffy, the president of the Montana Family Foundation, said the “hidden taxation” of inflation – which he said affected families more than COVID-19 itself – had put further stress on families raising young children. He noted the prices of diapers, baby food, car seats and formula had increased by more than 15% since the start of the pandemic.

Charles Robison, representing the Montana Chamber of Commerce and Montana Manufacturing Association, said the child tax credit would help parents re-enter the workforce or move from part-time to full-time work because they could better afford child care costs.

Caitlin Jensen, with the early childhood policy organization Zero to Five Montana, said the open-ended tax credit could help offset the costs of housing, transportation, child care and food. She said even a minimal credit has a positive impact on reducing poverty.

But she also said Montanans are sometimes spending close to $15,000 a year per child for child care, and parents are having to consider whether to stop working in order to care for their kids or as they wait for a slot to open at a child-care center.

“Although it does help, it doesn’t come nearly as close to addressing the child care crisis because greater investments are needed to help support and address that issue,” Jensen said.

She, Bender and Tirza Asbell, the advocacy director for Montana Women Vote, called for the measure to go further in opening up the qualifications.

Jensen asked Kassmier and the committee to expand the income threshold, add an income limit for married couples like the federal credit uses, and phase the credit out at a higher threshold rather than having it end at $50,000.

“This is important because we wouldn’t want to see a parent losing their eligibility for the credit due to a slight pay increase or household income increase,” she said.

The fiscal note for the measure says in 2021, there were 52,289 Montana households that the credit would apply to, which have 93,017 dependents living there. Based on Census projections, children ages 0 to 5 make up about 30% of those minors, it says, which would come out to around 27,700 children that would qualify for the credit.

The fiscal note assumes the general fund would pay out approximately $33.2 million each year starting in FY2025.

Rep. Ed Butcher, R-Winifred, appeared to be the only lawmaker who asked questions who was staunchly opposed to the measure, calling it a “welfare check” to people who aren’t paying taxes. Oppel told him he did not believe that was true.

Rep. Alice Buckley, D-Bozeman, noted there were likely many parents making more than $50,000 a year in her district who would not qualify for the credit. House Minority Leader Kim Abbott, D-Helena, queried Oppel on what more the administration could do to boost the child care network, but said she appreciated the bill and the structure of the program it puts in place.

Rep. Jill Cohenour, D-East Helena, said she, like Jensen, was worried about married households not qualifying, as well as with the “benefits cliff” that could happen without a phase-out. Jensen said expanding the threshold to $65,000 or higher could lift more children and families out of poverty.

Bender responded to a question from Abbott by saying the bill indeed targets lower- and moderate-income families who generally pay more of a share in taxes compared to wealthier individuals because of the state’s regressive tax structure.

Committee Vice Chairman Mark Thane, D-Missoula, noted that child care costs could be 20% of the annual income of someone making $50,000 a year. He asked Kassmier if he was willing to phase out the credit on the top end, which Kassmier said he was.

“We don’t want people to quit working. But I’m under the belief that if you’re making $50,000, you’re not going to quit your job for a $1,200 tax credit. You’ve probably got a lot of other bills,” Kassmier said.

Oppel, too, responded to a question by saying he was “happy” to work with the committee on a potential phase-out so long as it stays within the budget contained in the fiscal note and is revenue neutral.

The committee did not take executive action on the bill Thursday, as Chairman Paul Fielder, R-Thompson Falls, said the committee would like more detailed information on the eligibility pool and on possible amendments.