“Tax the rich” was a staple solution to budget difficulties that Gov. Mark Dayton raised regularly during his time in office from 2011 to 2018. But that philosophy hadn’t emerged much this session in the House Taxes Committee – until Tuesday and Wednesday, when it dominated the discussion.
The catalysts for the conversation were three bills built around the idea of altering tax brackets or inventing new ones, raising rates on those at the high end of income levels, be it from general income, capital gains, dividend income or inheritance.
All three were laid over for possible inclusion in the omnibus tax bill, which is expected to be released Sunday and presented at next Tuesday’s meeting of the House Taxes Committee before public testimony is heard and the amending and approval process begins.
HF2756, sponsored by Rep. Steve Sandell (DFL-Woodbury), would impose an additional 3 percent tax on capital gains and dividend income in excess of $500,000. The Department of Revenue estimates the new tax would add $207.5 million to the General Fund in Fiscal Year 2020 and would affect 2,700 full-year resident returns.
Speaking in favor of the bill, Rep. Jamie Becker-Finn (DFL-Roseville) said, “Capital gains are generated by wealth, not work,” to which Rep. Greg Davids (R-Preston) replied, “This side wants equality of opportunity. That side wants equality of results. … This is a success tax. The more you tax it, the less success you’ll have.”
HF2753, sponsored by Rep. Aisha Gomez (DFL-Mpls), would modify income tax brackets, raising the income level at which one would enter the second tier (7.05 percent) by between $855 and $1,710, depending upon filing status, and start the fourth tier (9.85 percent, the highest bracket) at lower levels than current law. Under the bill, the top bracket would begin at $150,000 for single filers and $250,000 for couples filing jointly (down from the current $273,150 for couples).
The Department of Revenue estimates that the change would mean about a $25 average decrease in taxes for 1.3 million returns and an average increase of $288 for 114,400 returns. It’s estimated that it would bring $100,000 less into the General Fund in Fiscal Year 2020, growing to $1.3 million less in Fiscal Year 2023.
On Wednesday, the debate about changing tax rates at the highest levels continued with another bill sponsored by Gomez, HF2557. It would add a new top bracket to the estate tax rate structure, having taxes rise to 16.8 percent on estates of $11.1 million or higher, beginning with the estates of those who die in tax year 2020.
The Department of Revenue estimates that the new bracket would result in $1.7 million more in the General Fund in Fiscal Year 2021.
Beth Kadoun, vice president of tax and fiscal policy for the Minnesota Chamber of Commerce, testified against the bill.
“This would give Minnesota the second highest estate tax of any state, behind only Washington, which has no income tax. Meanwhile, several states are repealing their estate taxes altogether.”
Rep. Diane Loeffler (DFL-Mpls) emphasized that the tax would affect only the 300 wealthiest people who die each year in the state.
None of the bills has a Senate companion.