St. Paul—The House Tax Bill passed Wednesday on a vote of 69-64. The bill ends the decade-long cycle of deficits, shifts, gimmicks and financial mismanagement of the state budget and responsibly funds a balanced budget into the future. The bill includes full payback of the school shift, funds strategic investments in education and provides property tax relief.
The tax proposal fully pays back our schools and eliminates budget gimmicks. The $854 million school shift is paid through a temporary income tax surcharge on only those with taxable income greater than $500,000 per joint filers. The surcharge will blink off after the shift is fully paid within two years. The bill closes the $627 million budget deficit and provides a structurally balanced budget.
“We have been faced with budget deficits for the past decade,” said Rep. Jay McNamar (DFL – Elbow Lake). “In order to fix that problem and invest in education and property tax relief, we need to raise revenue. I think the way we do it is fair. We are asking the wealthiest Minnesotans to pay their fair share so we can invest in our students and families.”
The House tax bill uses new revenue to make overdue investments to build a prosperous Minnesota future including a historic $700 million investment in education to build the “world’s best workforce” and $270 million in middle class property tax relief. Under this bill, 380,000 homeowners and renters will see their refunds increase and an additional 200,000 homeowners will also receive a refund.
Cities and counties will see a significant increase in local government and county program aid under this bill, which includes the largest LGA reform in a decade. Communities across District 12A will receive increases to their LGA including an increase of 28% for Breckenridge, 14% for Hancock, and 15% for Elbow Lake. Along with significant increases, the bill also reforms LGA to simplify and formula that determines yearly funding, allowing cities to better plan financially from year to year.
“LGA plays a huge role in local budgets,” said Rep. McNamar. “This bill will help local communities budget long term by having a better idea of what they’ll have coming in from the state. And those state funds will help bring down local property taxes.”
The bill also provides tax relief for Minnesota businesses and veterans. The included affiliate nexus levels the playing field between Minnesota bricks and mortar retailers and online retailers. The bill simplifies taxpaying with an upfront exemption for capital equipment, improves the Angel Investor Tax Credit and the Historic Credit and conforms to federal laws to make filing taxes easier for businesses. The proposal provides tax relief for veterans by creating a veterans jobs tax credit for Minnesota businesses and expands the income tax credit for veterans.
There are three main revenue components to the House Omnibus Tax bill. The first component increases tax fairness and asks the wealthiest 1.1% of Minnesotans to pay their fair share. The bill raises the income tax rate to 8.49% on the wealthiest 1.1% of individuals (taxable income greater than $400,000 per year for joint filer). This group currently pays a smaller percentage in income taxes than low-and middle-income earners and the state hasn’t raised the income tax since 1991. This modest increase would only affect 3.3% of businesses.
The second revenue component to the tax proposal closes corporate loopholes and repeals preferential tax treatment. The bill eliminates corporate loopholes that allow corporations to shelter profits overseas and eliminates other subsidies that are outdated, ineffective, or that the state can no longer afford.
The third revenue component in the bill recovers state costs from tobacco and alcohol consumption. The proposal increases the user-based fees on cigarettes to $2.83 per pack and catches Minnesota up with Iowa, South Dakota and Wisconsin who all have a higher cigarette tax. The bill increases the user-based fees on alcohol by 7 cents per beer. Those fees haven’t been raised since 1986.
Throughout the legislative session, Rep. McNamar encourages all constituents to contact him directly with any questions, comments, or concerns on any legislative issue. Rep. McNamar can be reached by phone at (651) 296-4929 or by email at email@example.com .