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Omnibus tax bill priorities lay out $1.3 billion in tax relief

Members of the House Taxes Committee listen to testimony on the omnibus bill during a March 23 hearing. Photo by Paul Battaglia
Members of the House Taxes Committee listen to testimony on the omnibus bill during a March 23 hearing. Photo by Paul Battaglia

If a tax bill is to be enacted this session, it is apparent that a lot of compromise will be needed to align House interests with those of the governor.

Revenue Commissioner Cynthia Bauerly clearly laid out to the House Taxes Committee Thursday the governor’s concerns with the proposed omnibus tax bill (HF4) – namely the lack of a working family tax credit, reductions to the renters property tax credit, no funding to help farmers complying with the new buffer law and no increase to local government aid.

Coming in with a proposed $1.3 billion in tax relief, Bauerly cautioned that the bill’s spending is at the expense of other areas in the state budget. The governor’s tax bill proposes around $300 million in relief.

“It is about priorities. We must ensure a fiscally responsible budget while investing in our future workforce and providing targeted tax relief for those most in need,” Bauerly said.

The overall House bill comes in at $4.76 billion over the 2018-19 biennium. This figure includes tax reductions, shifts in sales tax collections and proposed aids and credits.

Staff walked members through the bill and some testimony was taken. The bulk of committee work on the bill is expected to take place Friday, when amendments could be proffered.

WATCH The House Taxes Committee hears testimony on the bill 

Sponsored by Rep. Greg Davids (R-Preston), the committee chair, the bill holds many of the provisions contained in the 2016 tax bill that was vetoed because of a drafting error. However, this bill has several notable differences. For instance, any hope for a transportation funding package this session is directly linked to passage of the tax bill, which would shift $450 million of various vehicle-related fees and taxes from General Fund use to fund road and bridge projects.

Some of the tax relief put forward in the bill include:

  • $585 million in reduced individual income taxes;
  • $205.3 million in changes to the state general levy;
  • $161.7 million in changes to the estate tax;
  • $97.1 million in reduced corporate franchise taxes;
  • $92.9 million in sales and use tax reductions; and
  • $16.2 million in cigarette, tobacco and lawful gambling taxes.

Included in this relief is $269 million to allow individuals to subtract Social Security benefits from their state income tax. The bill would also increase the income threshold for the dependent care credit and provide various tax opportunities for those saving to pay for higher education costs and those dealing with student loan debt.

Revenue Commissioner Cynthia Bauerly comments on the House Taxes Committee omnibus bill during a hearing March 23. Photo by Paul Battaglia

New this year is a provision to help first-time homebuyers, by allowing for a subtraction up to $15,000 for married joint filers who save for that down payment in a special account.

Sure to cause angst moving forward is a provision that would allow for a refundable credit for a contribution to foundations that provide scholarships for nonpublic K-12 schools, make grants to charter schools or are foundations that support public schools.

“One of the primary concerns with this credit is that it has very little accountability to measure whether or not it is effective at actually creating positive outcomes,” said Paul Cumings, Revenue Department tax policy advisor, during an earlier committee hearing. “This bill shouldn’t be used as a tool to not provide the needed investments and improvement to our public schools across the Minnesota.”

The bill includes the $302 million in provisions put forward by the House Property Tax and Local Government Finance Division, including an exemption on the first $200,000 of commercial-industrial property from the state sales tax.

 

Sales and Use tax provisions

Under the bill, admissions to Minnesota State High School League events would no longer be subject to sales tax, and several nonprofit organizations would no longer have to collect sales tax on sponsored events. Additionally, Super Bowl admissions and related events would see an exemption. The bill would also allow the Super Bowl Host Committee to purchase nonresidential parking as a sale for resale. Next year’s Super Bowl is scheduled to be played at U.S. Bank Stadium.

While local governments and some nonprofits would be exempt from paying sales tax for construction materials, the high profile request for an exemption on materials used to build a proposed $150 million Minnesota United FC soccer stadium near the intersection of Interstate 94 and Snelling Avenue in St. Paul, as well as a permanent property tax exemption for the site are not in the bill. It is, however, included in the governor’s proposal.

While there is no Senate companion to HF4, the Senate has put forward their spending targets that would commit $900 million to tax initiatives. Sen. Roger Chamberlain (R-Lino Lakes) is chair of the Senate Taxes Committee, and would most likely sponsor any Senate counterpart to the House bill.

 

What’s in the bill?

The following are selected bills that have been incorporate in part, or in whole, into the omnibus tax bill:


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