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Governor’s tax bill 101: What does Walz want?

House Photography file photo
House Photography file photo

What does Gov. Tim Walz’s proposal for changing Minnesota tax laws mean to you?

Revenue Commissioner Cynthia Bauerly addressed that question for a lot of Minnesotans at Tuesday’s meeting of the House Taxes Committee. She was there to speak about HF2125, a bill sponsored by the committee’s chair, Rep. Paul Marquart (DFL-Dilworth), that one could characterize as “the governor’s tax bill.”

The bill was laid over for possible inclusion in the omnibus tax bill, but it will be a central part of the discussion that frames that omnibus bill.

Public testimony is scheduled on the bill at Wednesday’s 8 a.m. committee meeting.

After listing several areas in which the governor wishes to invest – for example, education, housing and rural broadband – Marquart said, “This tax bill is going to set the foundation for those very important investments. There’s no such thing as the status quo. You’re either moving forward or backward. And this bill moves us forward.”

So what would it mean to you?

If you’re filling out a tax return: Filers would be able to use current 2018 forms and instructions. If anything changes, the Department of Revenue would adjust the return accordingly. For the future, the bill would bring Minnesota into conformity with federal tax law by using adjusted gross income as the basis for figuring state income taxes. You would also be allowed to itemize deductions on your federal return and take the standard deduction on the state, or vice versa. And there would be a new state standard deduction and state personal and dependent exemptions while keeping many of the itemized deductions and exemptions allowed at the federal level.

Also, Bauerly said, “Under this proposal, 56 percent of Minnesota seniors would pay no taxes on their Social Security benefits … And one part of this plan is providing a state-based health insurance tax credit to make sure that enrollees pay no more than approximately 10 percent of their income on health care.”

If you have children: The working family credit currently allows the same credit for any family with “two or more” children, but that would be increased to “three or more” in the bill, thus allowing extra credit for having one more kid. The credit would also be increased by $100 for those filing singly or as head of household, and $200 for those married filing jointly. “This increase will help offset the impact of the governor’s infrastructure investments through the gas tax,” Bauerly said.

If you live in a city or town: The governor’s bill would increase local government aid and county program aid by about $30 million for each program.

House Taxes Committee 3/12/19

If your community is building something: Local governments and nonprofits would have their sales tax exemptions expanded on purchasing construction materials.

If you own property: The threshold would be raised to qualify for the minimum property tax and the minimum sale amount. It would also be easier for senior citizens to get a property tax deferral, lowering the occupancy requirement from 15 years to five.

If you’re a farmer: You would be able to expand your expensing. By conforming to federal law concerning depreciation deductions, the state’s farmers stand to see a reduction in taxes. And there would be a new riparian buffer credit. “Riparian” means waterside, and landowners could claim an annual property tax credit of $50 per acre where there’s water on their property.

If you own a business: That expensing provision expansion applies to you, too. And the state’s corporate alternative minimum tax would be repealed. But the bill would also limit the business losses and amount of net operating loss that you could deduct, as well as your net interest deduction if your receipts exceed $25 million. And some forms of foreign income will be newly taxed.

If you do business online: The physical presence requirement in current law would be replaced by an “economic nexus threshold” that mirrors current law for retailers. It would also require all remote sellers with annual sales of more than $100,000 to collect and remit sales tax.

If you buy technology for your company: There’s currently a sales tax exemption for certain types of software, but the amount of time you could receive it would be reduced from 20 years to 5 years, and the sales tax refund would be reduced from 100 to 50 percent.

If you’re an investor: The bill would provide $10 million a year to the “Angel Tax Credit” for those helping new businesses get started. It would adjust the requirements for how much employees must be paid and lower the minimum that must be invested, if it’s a minority or woman-owned business.

If you use tobacco: The bill would restore the inflator on cigarettes and moist snuff taxes, as well as a $3.50 premium cigar tax rate, so prices would likely rise for each.

If you’re wealthy: This bill doesn’t cater to you as much. An inflator would be reinserted into the state general levy, so large businesses won’t benefit as much (although the state coffers would, to the tune of $1 billion over the next 10 years, according to Bauerly). The estate tax subtraction would be frozen at $2.7 million.


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