Bill review: CTC Marriage Penalty Elimination (MN)

[daphnehanse11]

Bill review: MN HF2502 CTC Marriage Penalty Elimination

Reform ID: mn-hf2502-ctc-marriage-penalty | State: MN
Bill text: https://www.revisor.mn.gov/bills/bill.php?b=House&f=HF2502&ssn=0&y=2025
Description: Increases child credit phaseout threshold for joint filers from $35,000 to $63,900 to eliminate marriage penalty.

Merging this PR will publish the bill to the dashboard.

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What we model

Provision	Parameter	Current	Proposed
CTC joint phaseout threshold	...cwfc.phase_out.threshold.joint	$35,000 (2023), ~$37,910 (2025 adj.)	$63,900

Sets the joint filer phaseout threshold to exactly 2x the single threshold ($63,900 = 2 × $31,950), fully eliminating the marriage penalty in the child tax credit.

Validation

External estimates

Source	Estimate	Period	Link
MN Dept of Revenue (HITS 7.5 model)	-$63.9M (FY2026), -$69.5M (FY2027), -$73.1M (FY2028), -$77.2M (FY2029)	Fiscal year	Revenue Analysis

The DOR revenue analysis (March 19, 2025) used the HITS 7.5 Model based on a stratified sample of TY2022 actual MN tax returns. DOR finds about 60,900 married joint returns would see an average tax decrease of $1,050 per return for TY2025.

PE vs external comparison

Source	Estimate	vs PE	Difference
PE (PolicyEngine)	-$290M	—	—
MN DOR	-$63.9M (FY2026)	-78%	Review needed

⚠️ PE estimate is ~4.5x higher than the official DOR revenue analysis. Investigation found:

• PE: 251,983 joint gainers vs DOR: 60,900 — PE has 4.1x more affected returns
• PE's CPS-based MN microdata appears to significantly overestimate the number of joint filers receiving CWFC benefits in the affected income range
• PE counts 107,610 childless joint filers gaining $47.5M in WFC from the higher phaseout threshold; the DOR figure uses actual tax return data which is more reliable for state-specific credit programs
• PE's total baseline CWFC ($776M) is higher than DOR's TY2023 actual claims ($724.8M)

The DOR estimate (-$63.9M) based on actual tax return data should be considered more authoritative than PE's microsimulation for this bill. PE's CPS reweighting for MN overrepresents joint filers in the CWFC phaseout range.

Parameter changes

Parameter	Period	Value	Bill Reference
gov.states.mn.tax.income.credits.cwfc.phase_out.threshold.joint	2025-01-01.2100-12-31	63,900	Section 1, Subd. 2a(b)

Key results (PE — see validation caveat above)

Metric	Value
Revenue impact (PE)	-$290M
Revenue impact (DOR)	-$63.9M (FY2026)
Poverty rate	12.23% → 12.09% (-1.10%)
Child poverty rate	7.99% → 7.81% (-2.19%)
Winners	17.2%
Losers	0.0%

Decile impact

Decile	Relative Change	Avg Benefit
1	0.09%	$23
2	0.47%	$247
3	0.39%	$261
4	0.35%	$286
5	0.25%	$235
6	0.14%	$157
7	0.07%	$94
8	0.04%	$61
9	0.02%	$43
10	0.00%	$22

District impacts

District	Avg Benefit	Winners	Losers	Poverty Change	Child Poverty Change
MN-1	$180	20%	0%	-2.32%	-3.82%
MN-2	$138	17%	0%	-0.96%	-1.93%
MN-3	$98	15%	0%	-1.31%	-1.84%
MN-4	$127	15%	0%	-1.86%	-3.79%
MN-5	$119	14%	0%	-1.28%	-2.33%
MN-6	$144	17%	0%	-1.04%	-1.82%
MN-7	$196	21%	0%	0.00%	0.00%
MN-8	$167	19%	0%	-0.34%	-1.50%

Reform parameters JSON

{
  "gov.states.mn.tax.income.credits.cwfc.phase_out.threshold.joint": {
    "2025-01-01.2100-12-31": 63900
  }
}

Versions

• PolicyEngine US: 1.201.1
• Analysis year: 2025

[daphnehanse11]

Household Earnings Sweep: MN mn-hf2502-ctc-marriage-penalty

Household: Married couple, 2 children (ages 6, 14)
Year: 2025

• Max benefit: $3,119 at $69,095 earnings
• Affected earnings range: $38,945 – $95,477

Drag and drop /Users/daphnehansell/Documents/GitHub/state-legislative-tracker/charts/mn-hf2502-ctc-marriage-penalty.png below to embed the chart.

Generated by generate_household_chart.py