The checks are not quite in the mail, but they will be coming. And, if you make under a certain income, you can count on tax credits for each child in the household, getting a hunk of your rent back, and not having any taxes on your Social Security benefits.
Those are among the most prominent tax cuts, aids and credits coming from the $3 billion worth that are in the tax conference committee agreement reached late Wednesday and slated for final conferee approval on Thursday before heading to the House floor. HF1938 is sponsored by Rep. Aisha Gomez (DFL-Mpls) and Sen. Ann Rest (DFL-New Hope).
“I, for one, am very pleased with the amount of tax relief we are providing Minnesota taxpayers,” Rest said. “I think it’s unusual for a bill to be put together like this that reflects the priorities of all three groups that are involved in this. The focus for the House was property tax relief. That’s going to be something for which many Minnesotans are grateful. From the governor, I think that the child tax credit is going to be a historic item. For the Senate, the Social Security subtractions.”
“There are really incredible, transformational things in this bill that will benefit people across the state,” Gomez added. “The child tax credit will significantly cut child poverty because that is the right thing to do. In a state like Minnesota, I think we should all come together and say that no child should live in poverty, period. And this moves us toward that.
“The renter’s credit is huge. The property tax refunds are great. … I am so proud of the property tax division report, which you basically see here in its entirety.”
The big-ticket item in the agreement for the next biennium is a one-time refundable tax credit that accounts for $1.15 billion of the $3 billion total in tax cuts, aids and credits. That will result in $260 for tax filers and their dependents, up to a maximum of $1,300 for a family.
Speaking of families, the child tax credit would result in $1,750 per dependent, the credit beginning to phase out at $35,000 of income. There also will be a new renter’s income tax credit.
The number of Minnesotans paying some state tax on their Social Security benefits would be cut in half, with those making up to $100,000 of adjusted gross income (married, filing jointly) seeing no Social Security taxes. Those of that income level receiving a public pension would see a new subtraction for those benefits.
Cities and counties would receive a total of $300 million in one-time public safety aid. There will also be $80 million increases in both local government aid and county program aid, and another local government aid prepayment, as well.
And there’s a one-time boost in property tax refunds for homeowners and renters of about 20%, as well as a targeted refund for those whose property taxes go up over a certain percentage year-to-year.
As for the revenue side, the bill would raise an additional $1.03 billion during the next biennium, the largest portion coming from a new manner of calculating a company’s international income. It’s not the worldwide reporting that was touted when the House and Senate bills were first revealed – that was eliminated early on in conference committee negotiations – but instead will conform with federal tax law on global intangible low-tax income, which is commonly lent the acronym, GILTI.
It’s designed to discourage multinational companies from shifting profits on such easily moved assets as intellectual property rights from the United States to foreign jurisdictions with tax rates below those in the U.S. It’s estimated that such federal conformity will bring $437 million more to the state’s coffers during the 2024-25 biennium.
Also raising revenue would be phasing out the amount of allowable itemized deductions for those making incomes above $304,000, reducing allowable deductions for dividends received, and an additional 1% tax on net investment income over $1 million, with agricultural land sale gains excluded.
Rep. Greg Davids (R-Preston) said that, while “you’ve got some great tax relief in here, you really, really do,” he has reservations about the agreement.
“It’s been said in press conferences and so forth that this is the biggest tax reduction in state history,” Davids said. “But we must also let the record reflect that it’s also the largest tax increase in history, too. Not just maybe the tax part, but also education, transportation. People in Minnesota are going to get hit with some pretty hefty tax increases.”
Other tax policy changes in the bill include: