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Tax bill dwarfs other priorities, revenue commissioner tells conferees

By Lee Ann Schutz
House Taxes Committee Chair Greg Davids, left, and Senate Taxes Committee Chair Roger Chamberlain confer as staff goes through the provisions of the proposed conference committee report on the omnibus tax bill. Photo by Paul Battaglia

A little shaved off here and a little added there, and House and Senate conferees on the omnibus tax bill came to an agreement Monday on how much tax relief they would like the state to provide over the 2018-19 biennium.

With the House coming down about $150 million from its opening salvo of $1.31 billion and the Senate moving up a little over $100 million from their initial figure of about $900 million, the bill, at $1.15 billion in proposed tax relief, is still millions away from the governor’s $200 million figure.

That may be the rub as HF4*/ SF2255 continues to take shape over the coming days.

“We are still concerned about the overall cost [of the bill], said Revenue Commissioner Cynthia Bauerly. Now that the legislative bodies have agreed to spending targets, she noted real discussion can begin once the governor has a chance to review the proposal and come back with his recommendations.

Sponsored by Rep. Greg Davids (R-Preston) and Sen. Roger Chamberlain (R-Lino Lakes), the conference committee approved a delete-all amendment with the two DFL conferees voting no. The amended bill will be the basis for negotiation with the executive branch.

The most tax relief is proposed for those paying individual income taxes, approximately $625 million over the biennium and $716.98 million in the 2020-21 biennium.

House Taxes Committee Legislative Assistant Kelly Winsor and House Page Isaac Winnes manage documents for the taxes conference committee May 1. Photo by Paul Battaglia

Carrying the most expensive price tag at $235.9 million is a provision that would change how Social Security income would be taxed.

Married taxpayers with a maximum $77,000 income who file a joint return could subtract about $8,250 from that income when filing their taxes. For single taxpayers, the maximum subtraction would be $6,500 if their income is less than $60,200. The maximum subtraction would be reduced by 20 percent over these income thresholds.

House provisions related to farming include a beginning farmer tax credit program. At a biennial cost of around $9 million, it is aimed at helping younger farmers enter the field of agriculture. Making the biggest impact to that sector, however, is a provision to provide local property tax relief for farmers who carry a large share of the cost of school building bonds.

Also included from the original House bill is:

  • a first in the nation student loan tax credit;
  • tax deductions and credits for families contributing to 529 savings plans;
  • modification to the state’s research and development tax tier rate;
  • a refundable credit for expenses parents incur with delivery of a stillborn baby;
  • a sales tax exemption on materials used to build a proposed $150 million soccer stadium in St. Paul, as well as a permanent property tax exemption for the site;
  • expansion of the child and dependent care credit; and
  • changes to the state general levy (applies to commercial industrial and seasonal properties) excluding the first $150,000 in market value for C/I properties and eliminating the inflator for both C/I and cabin properties beginning in pay 2018.

The House proposal to designate $450 million of various vehicle-related fees and taxes to road and bridge projects did not make it into the bill, however the provision could be included in the omnibus transportation bill.

The Senate’s signature provision to lower the income tax rates for first-tier individual filers — at a cost of $393 million to the General Fund in the 2018-19 biennium — is not included.

Besides the cost, the bill has a long way to go before it would meet with governor approval.

Bauerly noted the absence of increases to the renters credit and the homeowners property tax credit. A Senate provision to increase the Working Family Credit, which is supported by the governor, is now absent. Additionally, the agreement would expand the subtraction for K-12 education expenses to include private-school tuition, a position that would be cause for a veto, Bauerly said.

In a March 13 letter, Dayton laid out his objections. “I strongly disagree with providing tax breaks for our state's wealthiest and corporations at the expense of working Minnesotans and families most in need. While businesses continue to see record profits, many families are just beginning to feel the effects of our state's improving economy.”

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