One of the biggest topics of the 2018 legislative session centers is on tax conformity. It may sound uninteresting on its face, but the ramifications of not approving this legislation are anything but boring.
Late last year the federal government approved a significant tax relief proposal and changed a number of ways taxation occurs. Minnesota lawmakers are now charged with implementing those changes, which can be difficult considering some of them do not act positively with tax deductions and other policies our state has in place.
This means if no changes are made before next year’s tax deadline, a good number of residents are going to pay higher income taxes.
I serve on the Minnesota House Taxes Committee, and I can tell you it was a struggle to craft legislation so the average Minnesotan would not see any increase at all. We attempted to balance the needs of individual and businesses equally, so that tax dollars we have available to spend this year would be evenly distributed to everybody.
That said, I think we have brought a strong proposal forward. Not only would it conform with federal tax law, but it would provide more tax relief to middle class Minnesotans.
Here are some of the highlights of the House plan:
Giving more than 2.1 million Minnesota filers an income tax decrease in tax year 2018
Helping middle-class Minnesotans keep more of what they earn by cutting the second tier income tax rate from 7.05% to 6.75% by tax year 2020
Lowering taxes for people at all income levels by increasing the standard deduction from $13,000 to $14,000
Protecting families by preserving a state personal and dependent exemption of $4,150
Encouraging affordable homeownership by allowing a state-itemized deduction of up to $30,000 in property taxes
This proposal differs significantly from a proposal Governor Dayton has brought forward, as it would force a tax increase on Minnesotans in every tax bracket, from the lowest to highest. That said, there are several other areas where the House and Governor’s Office have found agreement on tax conformity language, so hopefully that’s something we can build on and move forward.
Our tax conformity proposal could be debated on the House floor as early as next week, so stay tuned.