On Monday, the House approved legislation to bring Minnesota into compliance with federal tax changes that were made late last year. Passed on a bipartisan vote of 90-38, our plan simplifies Minnesota’s tax code and ensures that Minnesotans will be able to successfully file taxes next year and reap the benefits of the federal tax bill.
In addition to simplifying our state tax code, our plan also included the first income tax rate reduction in nearly 20 years. More specifically, the state’s second tier income tax bracket—those making between $25,000 and $85,000—will see their rate drop from 7.05% to 6.75% by 2020.
In total, 2.1 million Minnesotans will see lower taxes thanks to this legislation.
Other important changes to Minnesota’s tax code include increasing the standard deduction from $13,000 to $14,000, preserving a state personal and dependent exemption of $4,150, allowing a state-itemized deduction of up to $30,000 in property taxes, and reinvesting extra revenue from corporate tax changes into Section 179 conformity and overall rate reductions.
As I’ve detailed before, the 2017 congressional tax bill substantially changed the federal tax code. Without the legislature’s action responding to these changes through tax conformity, there would be a series of complex issues that the state’s revenue department would not be able to easily mitigate. For example, filing your tax return would likely be delayed or simply be unable to be processed.
These changes presented the legislature with a complex but historic opportunity to not only conform our state’s code to the federal code, but to simplify our own tax system. That’s why I am so proud of the legislation we passed on Monday.
Last month, Governor Dayton released his own plan for federal conformity and it stands in stark contrast to the bipartisan bill that was passed in the House.
His plan would raise taxes on 1.4 million Minnesotans. In fact, analysis by the Department of Revenue found that changes proposed in the governor's plan would raise taxes on Minnesotans of every income level, and make Minnesota's tax code more regressive. The department’s analysis went on to say that households making less than $32,000 would be hardest hit by Dayton’s plan.
In total, Governor Dayton has proposed reinstating more than $1 billion in health care tax increases and repealing tax reductions enacted last session.
Any such plan is highly unlikely to gain any meaningful support in either the House or Senate.
With only three weeks to go in the legislative session, we will have to work quickly to ensure conformity happens this year. This is something that simply needs to get done for all Minnesotans.
Finally, the public comment period on the Department of Agriculture's proposed nitrogen fertilizer rule has begun. If you would like to submit a comment, or get information about one of the 5 public hearings, please visit this link: https://minnesotaoah.granicusideas.com/discussions/minnesota-department-of-agriculture-notice-of-hearing
As is always the case, if you have any questions regarding tax conformity or any other matter related to state government, please do not hesitate to contact me. I can be reached by phone at 651-296-8237 or via email at email@example.com.
Have a great weekend,