Updated: 10:50 a.m.
House and Senate negotiators working on a tax bill at the Minnesota Capitol announced an agreement late Wednesday that includes tax rebates, child tax care credits, a break for those on Social Security and higher taxes for some corporations.
The bill will have to go back to the House and Senate for a final vote before reaching Gov. Tim Walz for his signature.
Before the final debates, here’s what you need to know.
1) There are rebate checks, but not as big as the ones Walz proposed
Under the proposal, Minnesotans who made up to $75,000 a year in 2021 (or $150,000 as a married couple) would receive a $260 tax rebate (or $520 rebate for a couple). The one-time rebate could be higher for families with children or dependents.
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Walz initially proposed $1,000 tax rebate checks for individuals but both Democrats and Republicans opposed the plan when it came forward. Democrats have since winnowed down the benefit to target those who they say need it most, while Republicans have warmed to a bigger rebate.
Families could receive a benefit of $260 for each child for up to three children if they meet the income limits. So a family of five that meets the threshold could get a $1,300 tax rebate overall.
2) Parents and families are set to get credits
Families with children or dependents could also see tax relief through child tax credits, as well as child care tax credits in the bill that would start at $1,750 but phase out for those with higher incomes.
Under the proposal, joint filers who make up to $35,000 would get the full $1,750 credit per dependent. The amount of the credit would gradually decrease for earners making up to about $90,000.
Initial tax summaries didn’t indicate what the average credit would be for Minnesota families.
The credits are targeted toward families with lower incomes and DFLers said they could drastically reduce child poverty in Minnesota.
“In a state like Minnesota, I think we all should just come together and say no child should live in poverty. Period,” said House Tax Chair Aisha Gomez, DFL-Minneapolis. “And this moves us toward that.”
3) Some on Social Security will see a tax cut
While lawmakers initially considered a total exemption of Social Security income from taxes, they settled on exempting 100 percent for those who make $100,000 a year or less with a phased out exemption for joint filers who make up to $140,000.
Lawmakers said the change would expand the exemption to about 80 percent of Social Security beneficiaries in the state.
The proposal also allows for an income subtraction for people who receive public pensions. Those who make less than $100,000 a year could subtract as much as $25,000.
4) Whose taxes are going up?
Members of the tax conference committee said they’d agreed to implement a global intangible low-taxed income (or GILTI), a tax that would pull in more money from businesses with global earnings.
People who make money on investment earnings such as stocks would also see a tax hike under the plan. Overall, the proposed tax increases would net the state about $2 billion over four years.
Republicans on the panel pushed back against the proposed tax increases.
“We hear in press conferences and so forth this is the biggest tax reduction in history. But we must also let the record reflect this is the largest tax increase in history, too,” said Rep. Greg Davids, R-Preston.
Other proposals to raise the gas tax, the sales tax in the Twin Cities area and to put a fee on deliveries are still being considered by lawmakers on the transportation conference committee. And the tax conference committee said it approved a list of local sales tax authorizations around that state that will be announced on Thursday.
There’s also an increase in the metro area sales tax in the big housing bill the Legislature has already passed.
5) What else is in the plan?
The committee recommended a one-time payment of $300 million to local law enforcement agencies and community-based public safety efforts, $35 million more in tribal aid over the next two years, and an $80 million boost for local government aid and county aid.
The Legislature is expected to work through the weekend to finish its work and has a Monday deadline to adjourn.