Some Minnesotans will see taxes rise under House GOP plan

The Minnesota House meets during the final week of the legislative session.
The Minnesota House meets during the final week of the 2017 legislative session on Monday, May 15, 2017 inside the Minnesota State Capitol in St. Paul.
Evan Frost | MPR News 2017

On the eve of the first hearing on his plan to conform Minnesota taxes to recent federal changes, the plan's author acknowledged some Minnesotans would pay more under the plan.

"If I can get that number down under 220,000 I'd be very happy," said Rep. Greg Davids, R-Preston. "I'm not going to be able to get to zero. I'd like to get to zero, but to get there would be more complicated than if we didn't conform at all. So, we really don't want to go there."

Because of the massive federal tax overhaul, many Minnesota households would see a tax increase if state lawmakers do nothing. Many would also see an increase if the state fully conformed to the federal law.

The House Republican plan would cut the rate for the second-lowest income tax tier in stages. It would go from 7.05 percent to 6.75 percent by 2020.

Davids, who chairs the House Taxes Committee, said the proposal is historic. The last income tax rate reduction was enacted in 2000.

The bill increases the standard deduction from $13,000 to $14,000 and provides a deduction of up to $30,000 for property taxes. The state personal and dependent exemption would remain.

It also helps businesses with a reduction in corporate tax rates. The corporate rate would drop from 9.8 to 9.64 by 2020.

The Republican proposal leaves out many people with low incomes, said Rep. Paul Marquart, DFL-Dilworth, because it doesn't target relief the way Gov. Mark Dayton's tax proposal would.

"I think when you have limited dollars to put into a tax bill it's got to be targeted to relief to those who need it the most. That's our working families and senior citizens," Marquart said.

Republicans have been highly critical of Dayton's tax plan.

Using Department of Revenue numbers, they contend his plan would raise taxes because his recommended cuts are combined with a proposal to extend a tax on health care providers that is set to end next year.

Dayton disputes the GOP assessment. A spokesperson said he was still reviewing the House proposal.

Interest groups have also been reviewing it.

The proposed corporate rate reduction drew praise from Beth Kadoun, vice president of tax and fiscal policy for the Minnesota Chamber of Commerce.

"When you reduce those rates, it does help then have some economic growth for the state. That's the same thing we've frankly been seeing from the federal tax bill. They reduced rates as well and we've been benefiting from increased economic growth because of that," Kadoun said.

But Nan Madden, director of the Minnesota Budget Project, said she's concerned about the phased-in cuts.

"We don't think we should be committing to additional tax cuts two years out, not knowing what the circumstances will be like at that time and whether that would put funding for schools and nursing homes and other public services at risk," Madden said.

Senate Republicans have not yet released their tax proposal.

Senate Taxes Committee chair Roger Chamberlain, R-Lino Lakes, said he hoped to have a bill ready soon, possibly by the end of the week. Chamberlain said the Senate bill would also benefit individuals and businesses. But he declined to say how it might compare the House bill.

"I think it's very important for Minnesotans to get tax relief. They are burdened too much by taxation and spending and regulation," he said. "They need to be let free to create, to innovate and produce."

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