Dear Neighbor,
It took Democrats precisely no time to take two years of economic growth and drive it right into the ditch.
That’s right. The two-year Republican budget, which ended June 30, generated more-than-anticipated revenue each and every report over the last biennium. It added up to more than $3 billion in revenue above projections through June - without raising taxes.
The Democrats? They took over the Legislature last January, raised taxes and fees by nearly $2.5 billion and jacked up spending at an unprecedented rate. Minnesota Management & Budget announced Thursday that state revenue intake was below projections for the first quarter Democrats had control of the budget.
You could see this coming from a mile away. Democrats are spending faster than our economy is growing. We were just getting to the point of full economic recovery following the Great Recession, then Gov. Dayton and fellow Democrats proved to be complete failures in setting a budget.
How bad is it? They even botched our tax code, causing headaches for Minnesota tax filers and costing us money. Here are some ways we’ll pay more:
Federally, you are not taxed on the principle sale amount of a home in foreclosure, but any taxpayer who had this type of debt forgiven in the past now must pay the full amount in Minnesota.
Minnesota families are allowed to deduct the cost of home mortgage insurance premiums on their federal return but must pay the full amount on their state tax return.
Marriage penalties occur when a family filing jointly enters a higher tax income bracket than if they had filed separately. An estimated 650,000 Minnesota families will pay on average $120 more per year in taxes because Democrats rejected an amendment to lift this burden.
On a federal tax return, families can deduct $3,000 for the first child and $6,000 for two or more children for child care expenses. However in Minnesota those amounts are $2,400 for one and $4,800 for two or more children.
When a family donates canned goods or other food items to a food shelf they are allowed to take a deduction on their federal taxes that is not included in Minnesota taxes.
Workers may exclude up to $240 a month in employer-provided transit or parking benefits on their federal taxes. That amount at the state level is only $125, leaving a gap of more than $1,300 per employee.
Students and educators also face the loss of deductions, including:
Those of us who claim an above-the-line deduction for tuition and fees on federal forms will need to add that amount back onto your income on state filings. Furthermore, Minnesota did not fully adopt the federal exclusion for employer-provided education assistance. Many Minnesotans will now have to report this income on their state filings.
Teachers often use their own money to make sure their classrooms have all of the necessary class supplies. Educators are allowed to deduct the first $250 in out-of-pocket expenses for purchasing classroom materials on their federal returns. Minnesota teachers will no longer be able to deduct these expenses on state forms.
You may exclude awards you receive from a number of national scholarship and financial assistance programs from your income on federal returns. Now these awards – including some for military veterans – will be taxed by Minnesota and must be included as income on state forms.
The federal government allows taxpayers to deduct distributions from a Coverdell Education Savings Account for elementary and secondary schooling. Minnesota taxpayers now must add these distributions to their income if used for K-12 education expenses.
Several federal provisions allow deductions for student loan interest. Minnesota taxpayers will not be able to deduct this interest when it’s paid either voluntarily or after the first 60 months that interest payments are required on the loan.
Federal tax conformity generally is a non-controversial issue. But, for whatever reason, Democrats refused to do the right thing this year. It looks like they just wanted to keep more of our money. I guess they expanded their “tax the rich” definition to include teachers, students, people experiencing foreclosure, veterans trying to reintegrate and more.
The 2014 session is just months away. I seriously hope there is a different approach when we get down to budget work in 2015.
Sincerely,
Tom