On Tuesday, the Minnesota Senate passed its comprehensive tax bill. The bipartisan legislation will lower taxes, increase wages, and grow Minnesota’s economy with measures to help middle-class families, seniors, students, and our state’s small businesses.
“Over the past several months, the Senate has heard details on the Governor’s tax proposal and House’s tax proposal, and we’ve listened to Minnesotans as they’ve objected to these burdensome ideas,” said Senator Jeff Howe (R-Rockville). “Senate Republicans approach our tax bill realistically and responsibly, addressing our state’s shared needs without crushing residents with taxes and fees. The tax bill passed today makes sure that government spending and taxing does not rise to any unsustainable levels but instead allows all Minnesota residents and our private sector the opportunity to succeed.”
The Senate’s Tax bill will hold virtually all of Minnesota’s taxpayers harmless while providing about half of the state’s taxpayers with a cut. The legislation includes the first income tax cut for Minnesotans since 2000 with a reduction of the middle-class rate of .25%, that would bring the rate down to 6.8% beginning in tax year 2019 and would further decrease to 6.67% by 2022.
The legislation also includes provisions that encourage economic growth and development. Specifically, it expands the ability for businesses and farmers to deduct equipment purchases to expand and invest in their operations while also reducing the statewide property tax levy by $50 million per year beginning in 2020. Other provisions make funding available for affordable and workforce housing development and lower taxes on affordable housing. Additionally, the bill encourages community development by allowing charitable gaming organizations to put more money back into the community and further reinstates angel credits to promote investment in Greater Minnesota businesses.
Parents of school-age children will benefit through an expansion of the K-12 education tax credit to include pre-school expenses. The K-12 education tax credit is also made available to more parents by increasing the income threshold. The innovative Opportunity for All Kids (OAK) scholarship program is also created allowing charitable donations to fund education scholarships for kids of low-income parents. Lastly, additional school district equalization aid is available to help districts with low-tax capacity and other funds are made available to assist with the Indian Child Welfare Act compliance.
Minnesota is one of the only states that continue to impose a second tax on seniors Social Security benefits. Under the Senate reform, Minnesota seniors would get to keep more of their Social Security dollars by increasing the income tax subtraction from $4,500 to $6,150.
Additionally, Veterans owned businesses will be able to take advantage of the Angel Tax Credit and the veterans homestead exclusion has been extended to benefit more veterans and their spouses.