Democrats force higher taxes on small businesses

ST. PAUL – Today the Senate voted on a tax corrections bill to repair mistakes from the rushed 2023 session that resulted in nearly $365 million in tax increases. The bill addresses changes for individual tax rates but leaves out corrections for small businesses and entrepreneurs.

“Mistakes happen, we know that,” said Sen. Mark Johnson (R- East Grand Forks). “But when we say we’re going to fix a mistake, we have to follow through on that; our word is sometimes all people can trust. I was happy to vote for this bill to prevent more taxes on individuals, but I’m disappointed today’s bill does not include the full repair for small businesses that help our communities thrive.”

The 2023 tax bill unintentionally used the 2019 standard deduction amounts for the starting point in tax year 2024 instead of the inflation adjusted amounts. Without updating this provision, filers would see their taxable income increase when filing their 2024 taxes by about $350 million total. Because it doesn’t affect filers this year, the fix has no fiscal impact to the state.  

“Leaving out the correction for small businesses to deduct their losses is a disappointment to Minnesota’s small businesses owners and entrepreneurs,” Senate Committee Tax Lead Bill Weber (R- Luverne) said. “The Committee Chairs made a promise to fix this mistake at the earliest possibility, and yet here we are, still waiting for a bill. And, despite Governor Walz’s promise to not raise taxes in 2024, he’s never met a tax increase he didn’t like. Delaying the fix for small businesses is indeed another tax hike.”

Senate Republicans offered an amendment to include the Net Operating Loss (NOL) date change in the bill, it was defeated on party lines. Not fixing the NOL date will mean small businesses and entrepreneurs will pay about $14.8 million more in taxes this year. This is in addition to the $10 billion in tax increases Democrats passed last year.