On Thursday, May 3, Senator Justin Eichorn (R-Grand Rapids) voted in support of a comprehensive tax plan that will cut income tax rates for the majority of Minnesotans. The legislation also brings the state’s tax code into conformity with the federal tax overhaul and protects virtually all Minnesotans from a tax increase.

“Last year, Congress passed a comprehensive tax overhaul designed to put more money back into the wallets of families and boost our nation’s economy. Today, we passed our own tax bill that sticks to those same principles by bringing Minnesota tax law into compliance with the federal changes, “said Sen. Justin Eichorn. “Our reform adheres to one of our key principles of keeping Minnesotans’ money in their own hands and helps foster economic growth in the state. Unfortunately, Minnesota is still is one of the highest taxed states in the nation so we’ve still got room to grow, but this is a good step in the right direction.”

The Senate’s tax plan will:

• Minnesota income taxes for 82% of working families and prevent a tax increase for 99.9% percent of the state.
• Drop the bottom tax rate a quarter of a percent, from 5.35% to 5.1% beginning in tax year 2018.
• Preserve the state personal and dependent exemption of $4,150, and the state standard deduction of $13,000.
• Protect popular deductions for mortgage interest, state and local taxes, home equity loan interest, and charitable donations.
• Extend the $5 million angel investor tax credit to help tech-focused startups.

• Encourage Main Street business and agriculture investment by conforming fully to Section 179 of the IRS tax code, allowing an immediate deduction of the entire cost of equipment.
• Gives Minnesotans more control over our tax code by separating the state tax code from the federal tax code – also known as the FAGI model.

Unlike Governor Dayton’s plan, the Senate Republican proposal does not reinstate the sick tax on health care services, which the Department of Revenue called “regressive” after estimating it will increase taxes on Minnesotans at every single income decile.

The bill also includes a major reform designed to protect future taxpayers from sending too much of their paychecks to St. Paul. When the November forecast projects a significant surplus, individual income tax rates will be automatically reduced one-tenth of one percent beginning in the next calendar year. If a healthy budget surplus continues in subsequent years, reductions could build each year until rates have been reduced by one percentage point.