The new federal tax law late last year forced Minnesota legislators to propose corresponding changes here.
Sen. Roger Chamberlain, R-Lino Lakes, the chair of the Senate tax committee, said a bill that syncs up Minnesota's law with the new federal system must pass this session.
"If we do nothing, tax returns and filing for citizens of this state becomes very difficult," he said. "If we conform and we don't do law changes, Minnesotans would be subject to huge tax increases."
Chamberlain said 99.8 percent of taxpayers, or 2.1 million Minnesotans, would see either no tax increase or a reduction under his bill.
The measure cuts the lowest income tax rate by a quarter of a percent. The new rate would be 5.1 percent. Popular deductions for charitable donations, mortgage interest and property taxes would remain.
Sen. Paul Anderson, R-Plymouth, said the changes would help Minnesota attract businesses and residents.
"We can't do anything about the weather. We can do something about our tax rates," Anderson said.
The bill would also establish a new tax cut trigger. The provision would automatically reduce the income and corporate rates by one-tenth of one percent whenever the November economic forecast projects a sufficient state budget surplus.
Sen. Dick Cohen, DFL-St. Paul, said the provision would tie lawmakers' hands and guarantee future deficits.
"This language is not only problematic. It has the possibility of being very destructive of the budget," Cohen said.
Chamberlain rejected criticism. He said taxes are too high because spending is too high.
"We keep spending and spending and spending. And the people out there that we're supposed to represent are forgotten. This tax system in this state is going to kill us. It is abusive. It punishes success and it punishes hard work," Chamberlain said.
Despite the DFL objections, the Senate passed the bill by 34-32.
The Senate bill would also benefit wealthy estates by increasing the threshold where they're taxed from $2.4 million to $5 million. Sen. Ann Rest, DFL-New Hope, argued that money would be better used to help low and middle-income families.
"That is not a good choice to spend that much money on dead multimillionaires," Rest said.
Senate Democrats argued unsuccessfully to shape the bill closer to Gov. Mark Dayton's proposal. His plan targets low and middle-income families through tax credits rather than rate reductions and would undo some provisions enacted last year, including tax breaks for tobacco products. The governor, unlike Senate Republicans, also wants to capture taxes from corporations with foreign operations.
Before the Senate voted to pass its bill, Dayton also raised concerns about the automatic tax cut provision, saying it would create a fiscal nightmare for the next governor and Legislature.
"You can see the path as clear as the iceberg ahead of the Titanic," Dayton said.