Saint Paul, Minnesota – The Minnesota House of Representatives passed the Omnibus Tax Bill today on a vote of 69 to 64. The bill balances the budget honestly, provides property tax relief, fully pays back the school shift and funds strategic investments in education, middle-class tax relief, and job creation. State Representative Mary Sawatzky (DFL – Willmar) voted for the legislation.
The bill provides $270 million in middle-class property tax relief for nearly 1 million Minnesotans through the Homestead Credit Refund, retooled renters’ credit and increased aid to cities and counties.
“Property taxes have nearly doubled in the last decade and are a tremendous concern for our families, seniors, farmers, and small businesses,” said Rep. Sawatzky. “This bill provides direct property tax relief and puts money back in the pockets of hard-working, middle-class Minnesotans, who are the economic engine of this state.”
The Homestead Credit Refund provides universal, targeted property tax relief to middle-class homeowners. Under this program, more than 300,000 homeowners (75% of filers) will see a refund increase. More than 100,000 additional homeowners will be eligible for a refund. Homeowners will be notified if they are eligible for a refund, increasing filers by 100,000. The average homeowner will see their refund increase by $212.
The previous Legislature raised property taxes on renters who earn less than $55,000 a year by cutting the Renter’s Credit. This provision enhances the Renters’ Credit, providing property tax relief to Minnesota renters (including elderly and disabled renters), so that the neediest renters see the greatest benefit. Under the improved Renter’s Credit, 66,000 filers will see a bigger refund, 10,000 additional renters will qualify, and the average renter will see their refund increase by $179.
The bill also increases Local Government Aid by $80 million and Country Program Aid by nearly $30 million. Willmar would see a 15 percent increase in LGA, Kandiyohi a 22 percent increase, Spicer a 49 percent increase, New London a 17 percent increase, and Atwater a 14 percent increase.
Two years ago, the previous legislature chose to borrow a record amount from Minnesota schools. The House Tax Bill pays back the $854 million still owed to Minnesota schools through a temporary, two-year income tax surcharge on only the wealthiest 0.5 percent of Minnesotans — taxable income greater than $500,000 per year for joint filer.
“We made a promise to the people of Minnesota that we would pay back the school shift, and this bill keeps that promise,” said Rep. Sawatzky. “Minnesotans told us loud and clear that they were tired of irresponsible budget gimmicks and paying this back is the right thing to do.”
The bill asks the wealthiest 1.1 percent of Minnesotans to pay their fair share by raising the income tax rate to 8.49 percent for individuals with a taxable income greater than $226,000 or $400,000 for joint filers. That 1.1 percent would pay an addition $3,700 per year on average. This increase would only affect 3.3 percent of businesses. This group currently pays a smaller percentage in income taxes than low-and middle-income earners.
The third revenue component in the bill recovers state costs from tobacco and alcohol consumption. The proposal increases the user-based fees on cigarettes to $2.83 per pack and catches Minnesota up with Iowa, South Dakota and Wisconsin who all have a higher cigarette tax. The bill increases the user-based fees on alcohol by 7 cents per beer. The alcohol tax hasn’t been raised since 1986. Alcohol and cigarette use cost the state billions of dollars annually in related health care, public safety and other costs.
These revenue increases will go to overdue investments aimed at building a prosperous Minnesota, including a historic $700 million investment in education from “cradle to career” and the $270 million in property tax relief programs.
“After a decade of deficits, gimmicks, property tax hikes, and fiscal mismanagement, this bill responsibly balances the budget and invests in a brighter future for the state of Minnesota,” said Rep. Sawatzky.