The Minnesota Senate passed the Tax bill with bipartisan support today. The bill will directly or indirectly hold 100% of Minnesota’s taxpayers harmless, and directly benefits about 50% of taxpayers with tax cuts. It expands tax relief to seniors, parents, small businesses, veterans, and encourages affordable housing investment and reduces property tax burdens. Most importantly, it will not increase revenue to the state budget in a time of surplus.
“Minnesota has a budget surplus of more than $1 billion,” said Sen. John Jasinski (R-Faribault). “With that much money in the bank, it baffles me that there are still those who want to raise taxes on low income and middle-income Minnesotans. We have more than enough to fund our core government priorities like roads and bridges and k-12 schools; it’s about time we let taxpayers keep more of the money they earn.”
Senate File 5 includes a middle-class rate cut of .25% to the second-tier income tax bracket. That moves the rate from 7.05% to 6.8% beginning in tax year 2019, and further reduces the rate to 6.67% beginning in tax year 2022. This will be the first income tax cut for Minnesotans since 2000.
The bill will encourage economic development and growth. It expands the ability for businesses and farmers to deduct equipment purchases to expand and invest in their operations and reduces the statewide property tax levy by $50 million per year beginning in 2020. Other provisions make additional funding available for affordable and workforce housing development and lowers taxes on affordable housing. Additionally, the bill encourages community development by allowing charitable gaming organizations to put more money back into the community and reinstates Angel credits to promote investment in greater Minnesota businesses.
Parents of school-age children will benefit through an expansion of the K-12 education tax credit to include pre-school expenses. The K-12 education tax credit is also made available to more parents by increasing the income threshold. The innovative Opportunity for All Kids (OAK) scholarship program is created in this tax bill by allowing charitable donations to fund education scholarships for kids of low-income parents. Lastly, additional school district equalization aid is available to help districts with low-tax capacity and funds are available to assist with the Indian Child Welfare Act compliance.
Seniors will get to keep more of their Social Security dollars by increasing the income tax subtraction from $4,500 to $6,150. Our aging population has been taxed once to earn social security, and Minnesota is just one of 13 states that imposes a second tax on the Social Security benefit. Additionally, the veterans homestead exclusion is extended to benefit more veterans and their spouses.