Last week, I promised to provide another update when our Tax bill was published. It’s now been passed out of the House Tax Committee and is on its way to the floor.
The Tax committee was allotted $3 billion from the budget surplus to use on tax reductions for the 2024/25 budget and $1.3 billion in permanent tax reductions in the 2026/27 budget and beyond. We’ve supplemented those allocations with a one percent tax surcharge on household income in excess of $1 million and by moving to tax corporations on the Minnesota share of their worldwide income, including income hidden away in foreign tax havens. These two measures will fund almost $1 billion in additional tax cuts of various kinds, as described below. Collectively, this would represent the largest net tax cut in state history with credits, rebates, and other provisions designed to maximize benefits for workers, families, and seniors. It also addresses years of rising property taxes and underinvestment in local communities.
The post-covid economic resurgence has not benefited all Minnesotans equally. In particular, families with children and seniors have experienced tighter budgets as wages have failed to match rising costs. That’s why the House tax bill provides balanced income tax relief to taxpayers, both young and old.
Income Tax Relief
The House tax bill provides both immediate and long-term tax relief.
Tax Rebate Checks:
About ? of the current surplus represents “one-time money” left over from federal Covid relief coupled with the results of legislative gridlock in previous sessions. The bill spends $1.25 billion of this “one-time money” on rebate checks of $275 per person, with an additional $275 for each dependent (up to three) – $1,100 for a family of four – which would reach more than 2 ½ million Minnesotans this summer to help them meet current day-to-day expenses.
Relief for Seniors:
The bill includes a full state Social Security income exemption for those earning less than $100,000 annually (married/joint) or $78,000 (single/head of household). Over three-fourths of Minnesota seniors would no longer pay any income tax on their Social Security income. Instead of exempting the Social Security income of high income seniors, as well, we chose to provide:
Relief for Families:
In a strong show of support for families, the bill provides for a new and simplified Child & Working Family Tax Credit of up to $1,175 per child which will impact more than one million families and reduce child poverty by 22.9%.
Property Tax relief
The House tax bill provides property tax relief to both homeowners and renters.
The failure of previous Legislatures to fully fund the State’s historic share of the cost of K-12 education and local government services has forced our cities, counties, and school districts to make up the difference with property taxes, and you’ve been seeing the impact on your property tax statements. The House DFL’s Tax bill delivers $648 million of property tax cuts and direct assistance to local communities. This includes expansion of the Homestead Credit Refund, targeting an additional $41 million of assistance over the biennium to homeowners who will benefit the most. Homeowners who faced exceptional property tax increases this year will be eligible for “circuit breaker” relief of up to $2,500. The value limit for the homestead market value exclusion is being increased from $413,800 to $437,100.
The bill also contains an additional $100 million for Local Government Aid to cities and $100 million for County Program Aid to help local communities deliver critical public services while keeping property taxes in check. We’re also indexing state funding for education to inflation in the Education Finance bill, so you should also begin to see relief from local school property tax levy increases.
The Renter’s Property Tax Refund program is being dramatically improved. By incorporating the credit into annual income tax filings, we anticipate that renters will claim an additional $378 million over the next two years.
I hope this helps explain some of the most impactful portions of the bill and why we’ve chosen to cut taxes in these ways. A synopsis of the entire bill can be found here. The Senate tax bill will undoubtedly be a little different, and those differences will be worked out in the conference committee. Still, I think that this basic framework will survive those negotiations.
This has been my first term on the Tax and Property Tax Committees, and I have found this work to be both engaging and fulfilling. Feel free to reach out to me with your questions.
I also serve on the Transportation Committee, which has proposed various types of user fee increases, which I’ll discuss in a forthcoming newsletter. As I discussed in my recent Star Tribune Op-Ed piece, The many reasons a gas tax hike is overdue in Minnesota, I’d much rather have pursued a simple gas tax increase (coupled with a mileage charge on electric vehicles, like mine). But when political realities take the gas tax off the table, this is what you get.
Keep in Touch
Don’t hesitate to reach out if I can provide any assistance. Please follow me on my Facebook page for further updates and invite your friends and family to do so as well.
Thanks for the honor of representing you at the Capitol.
Representative, District 50B
Minnesota House of Representatives