The “dream big” approach seems to have worked in forging a compromise tax bill.
The two tax chairs came in with one highest-priority item on each of their to-do lists, and they both made it intact into the final bill announced Saturday afternoon.
For the Senate, it was elimination of all income taxes on Social Security benefits. For the House, it was property tax relief, primarily in the form of making the renter’s credit into a refundable income tax credit.
Both provisions are in the final version of HF3669, a bill sponsored by those tax chairs, Rep. Paul Marquart (DFL-Dilworth) and Sen. Carla Nelson (R-Rochester). After they signed their conference committee’s agreement, it’s now up to the House and Senate to approve the compromise legislation, and House Speaker Melissa Hortman (DFL-Brooklyn Park) has said that it may be the last bill passed off the House Floor on Sunday night.
“We have in this bill the largest tax cuts in the history of this state,” Marquart said. “And it’s going to affect families and individuals across the state.”
“We have worked hard to come up with a great tax bill,” Nelson said. “Minnesotans all across our state are struggling with rising prices, and it is our duty to get this money back to them.”
As amended, the compromise legislation would reduce total taxes by $1.4 billion in the current biennium and $2.4 billion in the next one. Almost all of that change would be in individual income taxes.
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The Senate would get what it wants in the full subtraction of 100% of Social Security benefits from income taxes. That would reduce the General Fund by $509.6 million in fiscal year 2023.
The House would get its top priority in that the renter’s credit would become a refundable income tax credit. The largest piece of property tax reform in the bill, it would reduce the General Fund by $372.6 million in fiscal year 2023.
The Senate also wanted a reduction in the first-tier tax rate, and it would get one in the compromise, in that the rate would be reduced to 5.1% from the current 5.35%, reducing state revenues by $276.7 million.
That’s significantly smaller than the reduction to 2.8% from the current rate of 5.35% in the bill that passed the Senate. The compromise on budget targets reached by Legislative leaders and the governor clearly made that outside the realm of possibility, the revenue reduction far exceeding the total agreed to for tax cuts.
Here are the other big-ticket items, along with how much they would reduce General Fund revenue in fiscal year 2023, according to Department of Revenue estimates:
According to Revenue Department estimates, the bill would also provide, in fiscal year 2023, reductions of:
The bill also includes $44 million of increases in local government aid.
“This is going to have a real, meaningful impact on people’s lives,” Marquart said. “But nothing moves forward without the rest of the budget agreement passing. Sen. Nelson and I are both former teachers, so we’re saying to the other committees, ‘Get your homework done!’”