We have entered the final month of the 2018 legislative session and there are a handful of “big-ticket” items that remain unresolved. None bigger than the matter of federal tax conformity.
As I have detailed in previous correspondence, federal tax conformity is badly needed for Minnesota. If we do not respond to changes made in the federal tax code as a result of last year’s federal tax bill, there will be complex issues that the Minnesota Department of Revenue cannot easily mitigate. For instance, tax filings would likely be delayed or simply unable to be processed.
Additionally, if we do conform to the federal changes but fail to make any changes to our own state tax code, nearly a half-billion in new state taxes could be collected from Minnesotans in the current biennium and more than $1 billion in the 2020-21 biennium.
This clearly presents a predicament for lawmakers as we try to work through this extremely complicated situation with the hopes of holding as many Minnesotans harmless as possible and ensuring that they are able to see the full benefits of federal tax reform.
To make matters even more complicated, Governor Dayton released his own plan this past week—a plan that actually raises taxes on Minnesotans by over a billion dollars.
In fact, analysis conducted by Governor Dayton's own Department of Revenue showed that tax changes proposed in the governor's plan would raise taxes on Minnesotans of every income level, and make Minnesota's tax code more regressive.
Furthermore, the analysis found that under the Governor's plan, Minnesotans in every income bracket—not just the rich as he likes to so often claim—would experience a tax increase, and that households making less than $32,000 would be hit hardest. In the plan, Governor Dayton has proposed reinstating more than $1 billion in health care tax increases, repealing tax reductions enacted last session, and numerous changes reacting to tax changes at the federal level.
It is extremely unfortunate that the Governor has decided to pursue a plan that raises taxes on Minnesotans rich and poor alike.
The House released its tax conformity plan over the weekend and it focuses on returning as much of the budget surplus as possible to Minnesotans through tax relief, and holding as many Minnesotans harmless as possible as we deal with the changes to the federal tax code.
Again, this is a very complicated issue that is unprecedented during my time in the Legislature. Please do not hesitate to reach out to me if you have any questions on this matter or anything else related to state government. I can be reached by phone at 651-296-4229 or via email at email@example.com.