(The Center Square) – Minnesota will use its $17.5 billion surplus and revenue capture measures that target the wealthiest in the state to deliver tax cuts in a bill the House of Representatives passed Saturday.
Rep. Aisha Gomez, DFL-Minneapolis, and Sen. Ann Rest, DFL-New Hope, sponsored the bill, which passed the House 69-63 Saturday evening along party lines, the House’s Session Daily reported. HF1938 includes $3 billion in refunds, aids and credits during the 2024-2025 biennium. It increases taxes on some multinational corporations and people who make more than $1 million in adjusted gross income or receive more than $1 million in investment income.
“We were really focused on who it is who needs help the most in this moment,” Gomez said, Session Daily reported. “The centerpiece of this bill is the governor’s child tax credit.”
The Center on Poverty and Social Policy at Columbia University predicted in a May 19 memo at the request of Minnesota Commissioner of Revenue Paul Marquart that the bill’s multi-prong child tax credit proposal would decrease the child poverty rate from 6.9% to 4.6%. The Center pooled data from Minnesota respondents to the Current Population Survey and adjusted for change in economic conditions, inflation and benefit level.
Among other measures, the Child & Working Family Tax Credit provides up to $1,750 per child, which will impact more than 1 million families and reduce child poverty by one-third, according to a DFL Caucus news release. Married or joint taxpayers who earn less than $100,000 and single filers who earn less than $78,000 annually wouldn’t pay Social Security on state income. The exemption phases out at $118,000 for single filers and $140,000 for joint filers.
The bill, which is the largest tax cut in state history, prioritizes workers, families and seniors, who have experienced tighter budgets as their wages aren’t keeping up with inflation. The bill reforms the Renter’s Property Tax Refund program by incorporating the credit onto income tax filings, bringing $378 million more back to renters over the next two years. The Homestead Credit Refund would expand, with $41 million more in assistance to certain homeowners. There would be $80 million more for local government aid and $80 million for county program aid.
The bill’s measures include raising $816 million through Global Intangible Low-Taxed Income and $239 million over two years through domestic reduced Deductions for Dividends Received, the release said. The bill also phases out Standard/Itemized Deduction 10% for earners over $304k and 20% for those over $1 million and places a millionaire tax on Net Investment Income.
The bill also allocates $300 million for public safety aid to be distributed among counties and local governments by December 26, 2023. Minnesota taxpayers who were residents in 2021 and made less than $75,000 individually or $150,000 as a married couple would receive $260 per filer and dependent, up to an additional maximum credit of $780.
Speaker Melissa Hortman, DFL-Brooklyn Park, said the DFL budget invests in education, health care, economic security and communities’ safety and vitality.
“With much of the surplus being one-time money, investing in these areas now and into the future requires an ongoing commitment,” Hortman said. “We’re proposing to make the tax code more fair and more progressive to provide sustainable funding for education, health care, transportation, and so much more.”
Minnesota Chamber of Commerce Tax and Fiscal Policy Vice President Beth Kadoun said in a statement that the bill imposes $2.2 billion of new taxes, and many fall on job creators.
“This will make Minnesota less competitive, impose headwinds to the state’s economic growth and add greater fiscal instability to the state’s budget by relying on volatile revenue sources,” Kadoun said.