PoliGraph: Claims about the GOP tax bill
House Republicans unveiled their much anticipated tax bill this week, and it delivers on their promise to cut taxes for individuals.
Over the course of the next few weeks, you’ll hear Republicans say that their bill cuts taxes by $2 billion and that, as House Tax Committee chair Greg Davids, R-Preston said, “over 75 percent is targeted to the middle class and actual Minnesotans. Not corporations.”
As it turns out, both claims need some context.
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First, Republicans say that their bill cuts taxes by about $2 billion.
That’s true for the current budget cycle. But many of their proposed cuts will eventually cost the state a whole lot more when they are completely phased in.
For instance, the GOP proposal gradually phases out the statewide business property tax. In the current biennium, it will cost the state $453 million.
But when the property tax is completely phased-out, the Department of Revenue predicts it will cost the state about $2 billion per biennium. The number goes up over time because it also includes inflation.
A number of other tax cuts are phased in over time, too. By the time all the credits are completely phased-in, it would cost the state nearly $4 billion.
DFLers say the state can’t make these cuts last. But Republicans point out that state revenue has grown each year for three budget cycles, and at that rate, there should be more than enough money to cover the cuts in the future.
Republicans also say that 75 percent of their package targets middle class Minnesotans, and that’s basically true. The GOP didn’t define “middle class,” but there are a variety of tax cuts targeted at seniors, students, people with kids in childcare and average taxpayers.
The most prominent is an income tax exemption worth $538 million. But it lasts only for two years and will expire at the end of fiscal year 2017.
How much you benefit depends on your income and family status, according to analysis by the non-partisan House Research staff.
For instance, if you are married, have two dependents and make an adjusted gross income of $50,000 annually, you will get a $214 break.
But if you are married, have two dependents and make an adjusted gross income of $250,000 annually, you will get a $314 tax break. If you’re single and have no dependents, the benefit is much smaller.
The credits are capped at an adjusted gross income of $500,000, and according to Minnesota House researchers, most filers – about 75 percent – would benefit from the break.
What is more difficult to sort out is whether Davids’ statement holds true once all provisions of the tax proposal are phased-in almost a decade from now. What we do know is that by far the biggest benefit would be the repeal of the statewide business tax.
But there would still be breaks for seniors, students and parents in the mix.
It’s true the Republican tax bill will cost a little more than $2 billion in the coming biennium. But what Republicans don’t say is their proposal will cost the state a whole lot more in the future. As a result, this claim earns a misleading.
The GOP is on somewhat stronger footing when you consider their claim that most of their tax breaks target people rather than businesses. That’s true for fiscal years 2016 and 2017.
But the trouble with Davids’ statement is that it becomes less clear whether businesses or people will benefit most from the proposal once all the provisions are fully implemented.
For now, Davids’ claim leans toward accurate.