Sen. Rich Draheim: Taxes take center stage during 2018 MN legislative session
Originally published in the Northfield News
This week, the Minnesota legislature kicks off the 2018 session in St. Paul. While many issues are sure to be discussed, our state’s tax code is rapidly taking center stage.
As you are most likely aware, the President and United State Congress passed sweeping changes to our federal tax code. And, while federal law, the Tax Cuts and Jobs Act (TCJA) will have a major impact on our state’s tax code.
When discussing taxes, it is important to note that Minnesotans are subject to two separate tax codes – the federal code set by lawmakers in Washington D.C., and the Minnesota state tax code set by the legislature in St. Paul. While those codes and laws are separate, the state relies on many of the definitions and calculations used in the federal code to determine our Minnesota state taxes. Thus, whenever the federal government makes a change in their tax code, as they recently did with the TCJA, it impacts our state tax laws.
The question is, what effect will it have? Since the federal government passed their tax reform legislation, the Minnesota Department of Revenue estimates that our state will collect around an extra $850 million in taxpayer dollars this year. In the next budget cycle, that is estimated to grow to $1.5 billion. And, since the state legislature balanced our budget in 2017, it’s money our state government does not need. Further, the changes made by the federal government will complicate filing your state tax return next year – costing you more time, and possibly more money.
So, what can we do to fix this? The solution is tax conformity, which would realign our state tax code with the federal government. Conformity is important because it helps taxpayers file both their federal and Minnesota tax returns more easily, and helps the Minnesota Department of Revenue administer state tax laws. If we conform and reform our state tax code, not only will we simplify tax filing for all Minnesotans, but we will not over collect state taxes. Hard working families will be protected from shouldering an unnecessarily high tax burden while the state sits on excess cash.
Further, tax conformity allows Minnesota to reap the positive benefits the tax bill has already had on the economy. As a country, we are positioned for a period of strong, prolonged economic growth. However, for Minnesota to continue to take advantage, we must be competitive with our neighboring states. This means state tax policy that is pro-growth and encourages investment in our state through reasonable, predictable regulations, low taxes, and keeping our quality workforce in state.
If we can accomplish that, not only will Minnesotans see more money in their pocketbooks, but our state will be poised to spur new economic growth. And, that’s a result, regardless of political ideology, we can all support.
Sen. Rich Draheim (R-Madison Lake) is serving his first term in the Minnesota State Senate representing Senate District 20, which includes the communities of Belle Plaine, Cleveland, Dundas, Elko New Market, Heidelberg, Kilkenny, Le Center, Le Sueur, New Prague, Northfield, and Montgomery. Sen. Draheim is the Vice Chair of the Higher Education Finance and Policy Committee and serves on the Jobs and Economic Growth Finance and Policy Committee, and the Agriculture, Rural Development, and Housing Policy and Finance Committees.