(St. Paul, MN…) 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.
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.
- Give Minnesotans more control over our tax code by separating the state tax code from the federal tax code – also known as the FAGI model.
“This tax bill is about creating a bridge for people to make it easier for them to get to the other side. If we give people an opportunity they will create, innovate, out-perform, out-produce everybody. This state is great, and it can be greater,” said Sen. Roger Chamberlain (R-Lino Lakes).
“This is the only tax plan that protects the wages of 99.9% of Minnesota taxpayers, and 82% of families will actually receive a tax break,” said Sen. Majority Leader Paul Gazelka (R-Nisswa).
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.
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.