A breakdown of tax increases, cuts Minnesota lawmakers intend to pass
Sen. Majority Leader Kari Dziedzic, DFL-Minneapolis, (left) and House Speaker Melissa Hortman, DFL-Brooklyn Park. Photo by Michelle Griffith/Minnesota Reformer.
The Minnesota Legislature is on the verge of adopting a slew of tax cuts and sending tax rebate checks to 2.5 million Minnesotans. The DFL-controlled Legislature has also adopted or is on the verge of adopting tax hikes, too.
A committee of House and Senate members on Wednesday night released a tentative agreement on a $3 billion tax bill that includes rebate checks, tax credits and funding for local governments.
That’s just part of the picture, however. Metro residents in particular can expect to pay higher sales tax to pay for transit and housing improvements, while lawmakers are also seriously considering a fee on deliveries and a hike in the gas tax to pay for roads.
Here’s a rundown of some of the tax cuts and tax hikes.
Rebates, cuts and credits
Under the bill soon to hit the House and Senate, over 2.5 million Minnesotans would receive checks, though they are much smaller than what Gov. Tim Walz campaigned on and has been advocating for for over a year.
Single taxpayers who make up to $75,000 would receive a $260 check; married joint filers who make up to $150,000 would receive a $520 check; and families with children could receive an extra $260 per child up, with a maximum of three. There’s a hard ceiling on the payments, meaning Minnesotans who make $1 over the thresholds would be ineligible for any cash.
Walz originally proposed $1,000 for individual filers and $2,000 for married joint filers.
The deal also includes child tax credits, which DFL lawmakers say will reduce child poverty by 25%.
The full credits are $1,750 per child; it begins to phase out for married filers who make $35,000 annually and $29,500 for single taxpayers.
Minnesota’s tax on Social Security benefits would be eliminated for over 75% of Minnesotans. Couples with an annual income up to $100,000 would be exempt from state tax on Social Security benefits, with a phased-out exemption for married filers who make up to $140,000.
Republicans all session have been pushing for a full Social Security tax exemption; multiple Democrats last year campaigned on it, but the plan calls for the wealthiest Minnesotans to keep paying state tax on their benefits.
In addition, the agreement includes a one-time increase in property tax refunds for homeowners and renters of approximately 20%.
Tax hikes, but by how much?
Lawmakers have already passed some tax hikes and are considering others before they end their regular session — as required by the state constitution — on Monday.
The Legislature has already passed and Walz has signed a 0.25% — so one-fourth of a penny — sales tax increase in the Twin Cities metro area to fund affordable housing and homelessness prevention.
Members of the tax conference committee have proposed a so-called global intangible low-taxed income tax — or GILTI — on businesses with global earnings. This matches a federal tax provision and is estimated to generate over $435 million in fiscal years 2024-2025.
This policy, in addition to other smaller tax increases, will raise $1 billion in fiscal years 2024-2025, according to the tentative agreement.
The House and Senate differ on another sales tax tax increase, this time for transit. The House passed a 0.75% — or three-fourths of a penny — sales tax hike in the seven-county metro area for transit improvements. The Senate passed a 0.5% sales tax increase. They’re working on a compromise.
A statewide gas tax and a Twin Cities metro delivery tax are also still on the table, but their specifics haven’t been made public yet, according to House Speaker Melissa Hortman, DFL-Brooklyn Park, and Senate Majority Leader Kari Dziedzic, DFL-Minneapolis.
The House included a 75-cent fee on deliveries of packages from places like Amazon, DoorDash and restaurants for transportation improvements; the Senate had no delivery fee.
Consumers of THC edibles and drinks currently pay just sales tax on their intoxicants. That will change if and when the Legislature passes a bill fully legalizing, regulating and taxing recreational cannabis. The compromise version includes a gross receipts tax of 10% over and above sales tax.
Local sales taxes could go up, but that’s on you, not the Legislature
In addition, the tax conference committee on Wednesday said its bill included numerous local sales tax hikes, which the Legislature needs to approve before it receives an up or down vote from local residents.
The Senate’s tax bill included 36 local sales tax increases for various cities and counties, including Cottage Grove, Dilworth, Brooklyn Center, Monticello and Beltrami County.
House Taxes Chair Rep. Aisha Gomez, DFL-Minneapolis, however, declined to include any local sales tax increase proposals in the House bill. She argued the sales hikes aren’t applied equally to all residents and hurt low-income Minnesotans.
Sen. Ann Rest, DFL-New Hope, said at the meeting the sales tax increases would have a two-year moratorium, however.
As of Thursday evening, the tax committee had not released the actual bill language.
At a Thursday morning press conference, Senate Republicans blasted the tax increases.
“Earlier this session, we had a ($17.5) billion surplus. Minnesotans were expecting that to go back into their pockets,” said Senate Minority Leader Mark Johnson, R-East Grand Forks. “Minnesotans should feel outrage about what’s happening at the state Capitol right now. It’s runaway tax season down here.”
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