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House DFL unveils $3 billion tax package that includes rebates, Social Security tax cuts

(House Photography file photo)
(House Photography file photo)

Yes, there would be “Walz checks.” No, Social Security income wouldn’t be 100% exempt, but the number of Minnesotans who pay state taxes on it would be cut in half. And yes, some Minnesotans would see their taxes go up … mainly the highest earning 0.8% of income tax filers and corporations that hide earnings in tax shelters.

Those are some of the highlights of the omnibus tax bill unveiled Monday.

HF1938, as replaced by a delete-all amendment, would result in $3 billion in tax reductions and credits through fiscal year 2025, according to the Department of Revenue. Sponsored by Rep. Aisha Gomez (DFL-Mpls), the House Taxes Committee received a walkthrough Monday, with public testimony planned for Tuesday and amendments considered Wednesday.

“This bill constitutes the largest tax cut in Minnesota history,” Gomez said at a press briefing. “But these aren’t just any tax cuts. The cuts in this bill are targeted to those who need it the most, including seniors living on fixed incomes, families and children living in poverty, and Minnesotans across the state who are facing high property tax bills.”

So, you may be asking:

House DFL Press Conference 4/17/23

Are there “Walz checks?” Yes. Gov. Tim Walz has often mentioned his desire to send taxpayers a onetime refundable credit payment. Under the bill, they would provide $550 for married couples filing joint returns and $275 for single and other filers, plus $275 per dependent for up to three dependents. Credits would be based on 2021 incomes.

What about Social Security taxes? Those seeking the elimination of taxation on all Social Security income wouldn’t get it from this bill, but there would be no state taxes on your benefits if your adjusted gross income is under $100,000 for married joint filers or $78,000 for single taxpayers. And, if you’re among those with a public pension instead of Social Security, there will be a new subtraction for that, up to $25,000.

What help would it offer families? In addition to those $275 credits per kid, there would be an overhaul of the working family credit, transforming it into a credit that could be worth up to $1,175 per child. It would also increase the education credit’s phaseout threshold and maximum credit.

What if I have student loans? Your tax credit would become refundable, with the maximum credit growing from $500 to $1,000.

Would anyone see their taxes go up? Yes. The bill would create a new fifth tier for individual income taxes of 10.85%. It would apply to those with incomes of $1 million (married filing jointly) or $600,000 for single filers. And large corporations with offshore accounts would almost certainly see an increase, thanks to the imposition of worldwide combined reporting.

Would my property taxes go down? While that’s really up to your county and municipality, they would almost definitely have a lot more money with which to work, as local government aid and county program aid would each receive a total increase of $100 million from the state, as well as new local aid programs for affordable housing. And there would be temporary increases in property tax refunds and increased availability for the targeted property tax refund. The value thresholds and maximum amount for the homestead market value exclusion would be increased, and those with individual taxpayer identification numbers would become eligible for property tax refunds.

House Taxes Committee 4/17/23

How about if I’m a renter? What’s currently called “the renter’s credit” is actually a property tax refund, but it would truly become a refundable tax credit that you’d receive when filing your income taxes.

Anything specific to my town? If you live in one that asked for a sales tax exemption for construction materials used in some public project, you’d get it. If you were seeking permission to raise sales taxes for a dedicated purpose within your town or county, you wouldn’t. Except for St. Paul… sort of. The city asked for a sales tax to help pay for street improvements, but would instead get $30 million for the purpose in a onetime payment this July. And a dozen tax increment financing districts would be either established or altered. It would also allow your town to establish a tourism improvement district, a new designation.

Anything else? Soil and water conservation districts would finally have a dedicated funding source, a new Tribal Nation aid program would be established, the combined net receipts tax rate for charitable gambling revenues would be reduced, and there would be expanded tax credits for beginning farmers, those making films in the state, and those selling manufactured home parks to cooperatives.

What are the largest tax cuts? Here are the provisions that would reduce the state’s General Fund the most:

  • onetime refundable credit payment, $1.25 billion;
  • child and working family tax credit, $728.4 million;
  • modified Social Security subtraction, $409.2 million;
  • refundable renter’s income tax credit, $378.6 million;
  • exemption for construction materials for local governments and nonprofits, $255.6 million;
  • additional one-time 13.8% property tax refund payment, $124.6 million;
  • local government aid appropriation increase, $100 million;
  • county program aid appropriation increase, $100 million; and
  • local affordable housing aid, $100 million.

Meanwhile, on the other side of the ledger, tax receipts would be projected to increase by $529.3 million due to the new fifth-tier income tax rate, and another $452 million thanks to the worldwide combined reporting provision.

[More: View the spreadsheet]

What’s in the bill?

Here are some of the bills with provisions that appear in whole or in part in the omnibus tax bill:

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