How big will your tax cut be? Or are you among those who will see an increase?
The conference committee comparing the omnibus tax bills will be determining that in the coming days.
Friday afternoon, conferees met for the first time to consider two different versions of HF1938, sponsored by Rep. Aisha Gomez (DFL-Mpls), which underwent alterations in the Senate after it passed the House.
In total, the Senate bill would reduce taxes by a total of $2.44 billion in the next biennium, while the House total would come to $2.31 billion.
[MORE: View the spreadsheet]
Here are some of the key provisions in the bill, and where the House and Senate bills coincide and differ.
Pretty darn close
Social Security and public pensions: The House and Senate agree on this. Social Security income would be exempt from taxation for married joint filers making up to $100,000 and individuals with incomes up to $78,000. It’s estimated this would cover 76% of all Minnesotans who receive such benefits. The House would phase out the exemption at $120,000, the Senate at $140,000. Both bills would create a $25,000 maximum public pension subtraction for married joint filers with adjusted gross incomes under $100,000.
Rebate checks: Filers with adjusted gross incomes under $75,000 (or $150,000 if married filing jointly) would receive a one-time refundable tax credit in the House bill or a one-time rebate in the Senate version. In the House bill, filers would get $275 back or $550 if filing jointly, with another $275 for each dependent. The Senate would raise that rebate to $279 for single filers or $558 for joint filers but reduce the dependent rebate to $56 per child. Both bills limit the rebate to three children.
Similar ideas, different dollars
Property taxes: The House includes a one-time 13.8% boost for homestead credit refunds and renter’s credits, making the latter credit refundable and available when filing income tax returns. And all eligible homeowner copays would be reduced 5%. If your property taxes rise more than 10% year over year, the Senate bill would provide a maximum refund of $2,000, while the House bill would provide a maximum refund of $2,500 if your property taxes go up more than 6% during a year. Both bills would allow those with Individual Taxpayer Identification Numbers to qualify for homestead status.
Child tax credits: The House language allows for larger tax credits – up to $1,175 per child – but would start phasing out the credit at about $35,000 in income for married joint filers. While the House would restructure the current working family credit, the Senate would create a new tax credit of $620 per child (up to three children) for families making up to $80,000. There would also be a child care tax credit of between $3,000 and $12,500 for families making up to $160,000, phasing out up to $200,000. And both bills contain expanded sales tax exemptions for baby products.
Aid to cities and counties: In what’s been hailed by its architects as the most effective way to reduce property tax burdens, each bill would increase allocations for local government aid and county program aid. The House would put $100 million more into each program and index it to inflation, while the Senate would increase appropriations for the two programs by $40 million each. But the Senate language also includes $325 million in one-time public safety aid. Each bill would allow sales tax exemptions for construction materials on municipal projects, the House offering a blanket exemption to all cities, the Senate on a couple dozen projects. Each bill would also expand some tax increment financing districts. The House bill also includes $100 million in local affordable housing aid, $75 million in tribal nation aid and $40 million in local homelessness prevention aid.
Education credits: The House bill would make the state’s student loan credit refundable and increase the maximum credit from $500 to $1,000. As for the K-12 credit for classroom-related expenses, each bill would raise the maximum from $1,000 to $1,500 and the income limit for the full credit to $70,000.
In both bills, but with credits at different levels: Among credits that will require compromise are the film production credit and the beginning farmer’s credit. And both bills include dedicated funding for soil and water conservation districts.
The big differences
Local sales taxes: The Senate would allow 29 cities and five counties to place proposals for sales tax increases on local ballots in order to fund specific local projects. The House bill contains no such approvals.
What goes up: The House bill contains a new fifth-tier income tax bracket of 10.85% for those with incomes over $600,000 or $1 million if married filing jointly. The Senate bill has no such language, but both bills would require multinational Minnesota-based corporations to pay state taxes on income accrued outside the United States.
In one bill, but not the other: The Senate would like to reinstate the angel tax credit, create a shortline railroad modernization credit, and pay off the bonds on U.S. Bank Stadium. The House would also make some changes to lawful gambling taxes.
The conference committee plans to meet again Saturday morning.