The Minnesota Senate passed a tax plan on Thursday that will cut state income taxes for 82% of working families and prevent a tax increase for everyone else. In total, 2.1 million Minnesota households will keep more of their pay as a result of the state changes.

“Whether I am attending events around town or meeting with constituents in my capitol office, I hear over and over that Minnesotans think their taxes are too high,” said Senator Mike Goggin (R-Red Wing). “I agree. Last session we passed a major tax reform bill – the biggest in two decades. This year we are continuing to reduce the tax burden on Minnesotans who get up every day to go to work. There is still more to do, but this was a great second step.”

The plan will:

• 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 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.