Panel debates broad childcare subtraction in HF495; advocates call for systemic fixes

Representative Johnson presented House File 495 to allow a subtraction from taxable income for amounts paid to licensed child care centers and family child care homes. The bill would remove existing limits and make the subtraction broadly available to taxpayers who pay for licensed care; the Department's revenue analysis in the packet estimated about 81,700 returns would benefit with an average tax decrease of about $639.

A virtual testifier, Anelle Velasco of Saint Paul, testified in opposition. She said the bill is “a small patch around the edges of a system that needs structural reform,” noting child care providers and teachers are underpaid and that the bill does not address supply or workforce shortages. “This bill reduces the taxable income by the amount paid by parents for childcare less any amount covered by child care assistance... this bill doesn't address child care providers or teachers at all,” Velasco said.

Members pressed the bill’s targeting and cost. Representative Smith and others argued an uncapped subtraction structured as a tax subtraction (not a refundable credit) would disproportionately assist higher‑income families who have tax liability, while lower‑income families who receive assistance would see smaller benefit. Staff (Sean Williams) clarified the subtraction limits eligibility to licensed centers under chapter 142B and that typical summer camps would not qualify unless licensed as child care.

Representative Johnson said the bill is intended to help working and middle‑income families now while longer‑term structural solutions are developed. The committee voted to lay HF495 over for possible inclusion in the omnibus tax bill.