On Saturday, April 21, the House Tax Committee posted legislation (HF 4385) simplifying Minnesota’s tax code to fully benefit from recent federal tax reform and provide additional tax relief to middle-class Minnesotans. In addition to tax conformity, the centerpiece of our bill is a historic second tier income tax rate reduction.
As a result of House Republicans’ proposal, more than 2.1 million Minnesota filers will benefit from a tax cut in tax year 2018. Highlights include:
• Helping middle-class Minnesotans keep more of what they earn by cutting the second tier income tax rate from 7.05% to 6.75% by tax year 2020. This would mark the first income tax rate reduction in Minnesota since 2000.
• Lowering taxes for people at all income levels by increasing the standard deduction from $13,000 to $14,000.
• Protecting families by preserving a state personal and dependent exemption of $4,150.
• Encouraging affordable homeownership by allowing a state-itemized deduction of up to $30,000 in property taxes.
• Supporting hometown businesses and farmers by reinvesting extra revenue from corporate tax changes into Section 179 conformity and overall rate reductions.
In contrast to House Republicans’ proposal to simplify and reduce taxes, a new analysis conducted by the Minnesota Department of Revenue shows that tax changes proposed in the governor's supplemental budget would raise taxes on Minnesotans of every income level, and make Minnesota's tax code more regressive.
Federal tax reform presented a significant opportunity to simplify our state tax code. House Republicans’ goal from the onset was holding as many Minnesotans harmless as possible and preventing headaches for filers next year. Paired with surplus dollars, our proposal delivers broad tax relief to the middle-class including the first income tax rate cut in nearly 20 years.
Prioritizing Tax Relief, Roads & Bridges
Earlier this month, House Republicans announced targets for budget adjustments.
House Republican plan dedicates the largest portion of the budget surplus toward simplifying Minnesota’s tax code to fully benefit from recent federal tax reform and provide additional tax relief to the middle-class. With state government fully funded from last year’s two year budget, major investments will focus on common-sense issues like fixing roads and bridges and improving student safety. Savings are found through efficiencies in state government spending.
Check out the Minnesota Public Radio article detailing how the House GOP wants two-thirds of surplus for tax plan, roads [].
House Republicans also intend on returning $75 million of unspent funds from the 2017 Premium Rebate Program to the budget reserve, protecting Minnesota’s fiscal integrity. Governor Dayton is proposing to spend those tax dollars.
The House adopted these budget adjustments in Ways and Means Committee with strong bipartisan support.
2017 was the most productive legislative session in modern history. Our Republican-led legislature delivered significant tax relief and a major investment in roads and bridges. These 2018 budget adjustments continue our strong commitment to Minnesota families through tax relief, roads and bridges, and school safety.