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Mixed reaction in Minnesota to Republican tax overhaul plan

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Congressman Erik Paulsen
Erik Paulsen, a Republican representing parts of Minnesota in Congress, says his party's tax plan is a "game-changer." Democrats are critical of it.
Jim Mone | AP file

House Republican leaders Thursday touted their tax plan as a simplification of the system, which they say will allow Americans to file their returns on a form the size of a postcard. 

The plan cuts individual and corporate tax rates, reduces the number of tax brackets and doubles the standard deduction. Existing rules for 401(k) retirement accounts and the charitable deduction would remain intact.

The proposal is aimed at making sure everyone will have more money in their pockets, said Minnesota Republican U.S. Rep. Erik Paulsen.

"This tax reform plan is a game-changer," he said. "It's going to be good for take-home pay. It's going to be good for growth. It's going to be good for our economy and our country."

Paulsen said making changes to the federal tax code for the first time in 30 years won't be easy. But he's confident there is momentum building to make it happen by year's end.

But minority Democrats were quick to criticize the proposal.

The House GOP plan is a "massive giveaway to billionaires, CEOs and big corporations," said Minnesota Democratic U.S. Rep. Betty McCollum, who argued that most middle-class families would see no tax benefit and some would pay more.

"It continues to let corporations hang onto the tax breaks they currently have and even slashes their rates farther," she said. "By eliminating the estate tax completely, it allows the wealthier heirs, and I'm talking about the 1 percent or .1 percent of people in the United States, to completely dodge paying their taxes."

The Republican proposal also modifies or eliminates many existing tax deductions. The deduction for state and local income and sales taxes would go away. The mortgage interest deduction would be cut in half and the deduction for local property taxes would also be capped at $10,000.  

The proposed changes could have a long-term impact on the housing market and on people's ability to afford the homes they want to buy, said Chris Galler, CEO of the Minnesota Association of Realtors.

"As you know, there's been a shortage of inventory where people haven't been moving up," Galler said. "We're concerned that this may further exacerbate the fact that there are not enough affordable homes out there for people."   

Remi Stone, executive vice president of the Builders Association of Minnesota, has similar concerns. Stone said potential homebuyers will no longer have the same incentives to make their purchases.

"It puts homeownership more in parity with rental," Stone said. "So yes, definitely, we're very concerned this will have a chilling effect on the housing market."    

Other business groups see big potential benefits. The plan would reduce the corporate tax rate from 35 percent to 20 percent.

The proposal would mean faster economic growth and more jobs Beth Kadoun, vice president for tax and fiscal policy at the Minnesota Chamber of Commerce. 

The National Federation of Independent Business came out against the plan Thursday, saying it doesn't do enough to help small businesses, but Kadoun contends many small businesses would also benefit from the rate reduction for individual income taxes, because that's the avenue they use for paying their business taxes. 

"This will bring us much more in line with the other developed countries," Kadoun said, "letting our businesses be able to compete much easier, as well as to encourage those dollars that are earned overseas to be brought back into the U.S. and hopefully Minnesota to be reinvested within our state."