One critical decision left for the Minnesota Legislature in the remaining two-plus weeks of its session is how much to cut taxes and for whom.
The Minnesota House set up those end-of-session negotiations Wednesday with passage of a plan that’s more-limited than one that the Senate advanced earlier this year.
It would be difficult for lawmakers to reach a deal for dispersing the rest of Minnesota’s giant budget surplus unless at least some is sent back as tax relief.
The House DFL-driven plan, approved on a 69-62 vote, would deliver about $1.6 billion in tax savings this year and more into the future. House Taxes Committee Chair Paul Marquart, DFL-Dilworth, said he fashioned his plan to make “strategic, crucial tax cuts” for those facing the most financial constraints.
“We know that young families at this time of their stage of life probably are facing the highest bills they'll ever face – child care costs, student loan payments, mortgage, your rent payments, property taxes,” Marquart said. “And so this bill really zeroes in on: How can we reduce those costs?”
The bill delivers money through a smattering of credit, refund and rebate programs – new and old – rather than reducing rates:
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Families with children under 5 years old could access a new $3,000 tax credit, up to $7,500 per year in total.
Households with children 17 and younger could get a one-time rebate of $325 for each child under 17, with some differences for incomes above $140,000.
Some renters and homeowners would qualify for additional property-tax related credits and be able to access them sooner.
Student loan tax credits would rise to $1,400
Social Security income of up to $75,000 would be exempt from income tax.
Last month, the Republican-led Senate approved a bill with a significant income tax rate cut and elimination of any tax on Social Security income. The bottom income tax bracket would fall from 5.35 percent to 2.8 percent, affecting all filers on the first portion of their taxable income.
It would cost about $8 billion over three years.
Rep. Kristin Robbins, R-Maple Grove, said that’s the way to go.
“Minnesota is not competitive in our taxes,” Robbins said. “If we are going to be able to compete with other states and grow our economy we have to get out of the top five and top 10 tax brackets in the nation.”
Rep. Mike Howard, DFL-Richfield, said the House version puts the emphasis on people struggling to make ends meet.
“If you're a CEO, making over a million dollars a year, you're not going to get a tax cut in this bill. And that's the right priority,” Howard said. “In this moment for Minnesotans, we shouldn't be providing blanket tax cuts.”
Howard said the bill still leaves room for considerable new aid to schools and other priorities.
The House-approved rebate proposal differs from one recommended by DFL Gov. Tim Walz, who wants to send one-time checks of up to $1,000 out this year. His is general in nature and not based on whether filers are raising children.
But both the Walz and House versions would go to people who make too little to have a state income tax liability.
Rep. Jim Nash, R-Waconia, said that kind of eligibility is too loose.
“I understand that this is an attempt to sprinkle a little love out to everybody,” Nash said, “but the bill is pretty clear that it's going to people who have not paid in. And I think that that's preposterous.”