Governor Significantly Expands Child Care Tax Credit from Wisconsin

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Wisconsin residents, going forward, will get more in child care tax credits from the state. Gov. Tony Evers signed into law a new bill that expands a child care tax credit from Wisconsin to 100% of a claimant’s federal credit. The governor signed the new bill just days after vetoing three other GOP bills that would have offered $800 million in tax cuts.

Expanded child care tax credit from Wisconsin: what’s the need?

On Monday, Democratic Gov. Evers signed into law a Republican-authored bill that significantly expands the child care tax credit from Wisconsin because “the cost of child care is too darn high.” Further, the governor said the new bill will help in keeping parents in the workforce.

Last year, the median child care cost in Milwaukee County was $19,096, or about 26% of the median family income of $62,314. In Dane County, the state’s second-most populous county after Milwaukee, the median child care cost was $19,586, or about 17.6% of the $94,813 median family income, according to the data from the U.S. Department of Labor.

The new bill now expands the child care tax credit to 100% of the claimants’ federal child care tax credit, up from 50% currently. Also, the bill increases the maximum eligible expenses (care costs and other related expenses) from $3,000 to $10,000 for one qualifying dependent and to $20,000 (from $6,000) for two or more dependents.

The expanded child care tax credit bill received bipartisan support in the Legislature. Gov. Evers lauded the bipartisan support and urged lawmakers to examine more measures to assist families and child care providers.

Will it impact the state revenue?

Wisconsin’s Department of Revenue estimates the expansion to cost the state about $73 million in annual revenue in the 2025 fiscal year. The expanded child care tax credit bill was part of a tax package that, if approved, would have cost the state about $1.4 billion in revenue annually.

Gov. Evers vetoed the rest of the Republican-sponsored tax cut package last week, saying it would have put the state on “a path toward insolvency.” Vetoed bills included proposals to reduce taxes for retirees and expand a tax credit for married couples.

Also, one of the vetoed bills would have expanded the state’s second lowest income tax bracket to cover individuals with annual income up to $112,500, up from $28,640.

Republicans have criticized the governor for killing the tax relief to the middle class. Gov. Evers, on the other hand, has blasted the GOP-controlled Legislature for not allowing funding for the Child Care Counts, which is a pandemic-era program that used federal COVID funding to offer grants to child care centers.

Gov. Evers vetoed a similar GOP tax relief plan in November. In July of last year, the governor used his partial veto power to drastically reduce the size of the $3.5 billion GOP income tax cut plan to just $175 million.