MN Senate passes omnibus tax bill
ST. PAUL, Minn. – Senate lawmakers approved the omnibus tax bill today on a bi-partisan vote. The plan provides an honest budget solution, much-needed property tax relief and reforms that modernize Minnesotan’s tax system so it supports a modern economy. These reforms not only benefit middle class families, but also business owners across the state.
“We came into this session with a clear priority to stabilize Minnesota’s fiscal condition, ending the decade-long roller coaster of mostly large deficits and a few small surpluses,” Tax Chair, Senator Rod Skoe (DFL-Clearbrook) said following the bill’s passage. “Our tax plan balances Minnesota’s budget for the next four years, not just for this biennium. We invest in state priorities that haven’t been properly supported in more than a decade, and we reform the state’s tax system to stop the endless cycle of budget deficits.”
Revenue raised in this bill resolves Minnesota’s current deficit and provides future stability by asking seven percent of the highest-income Minnesotans to pay more in income taxes. “93 percent of Minnesotans will not see any change in their income taxes under this bill,” continued Sen. Skoe. “We feel taxpayers who fall under the new third tier can pay more to invest in education, property tax relief and key incentives for job growth—benefits 100 percent of Minnesotans will see.”
This bill also modernizes many provisions in Minnesota’s tax system to reflect the way the state’s economy currently operates. “We’ve provided incentives for business growth. We’ve lowered the corporate tax rate—the lowest since the 1960s, and closed corporate loopholes. We also provide upfront sales tax exemptions on capital equipment and eliminate cumbersome processes to help employers put money back into their businesses and work more efficiently,” said Senator Ann Rest (DFL-New Hope), the Tax Reform Division Chair.
Furthermore, the sales tax rate is reduced to 6%–the lowest in 22 years–by expanding the base to clothing and some services that better reflect the purchasing habits of a modern economy. Minnesota consumers will save more than $1.2 billion in the next two years on current purchases because of this reduction. “In 1950, services accounted for just 39% of retail sales. Today, they account for 67% of retail sales,” continued Sen. Rest. “We lower the rate and broaden the base making Minnesota much more competitive with our surrounding states.”
Up to $450 million in property tax relief is provided by the Senate tax plan. Property taxes in Minnesota have increased 86% since 2003. “That tax, which is not based on a person’s ability to pay, has skyrocketed,” Sen. Skoe explained. It is estimated that under this bill, metro-area homestead property taxes drop by 3.7% and Greater Minnesota property taxes drop by 6.3%. These estimates include increased aid to cities through Local Government Aid reform.
Cities and counties also receive relief through state sales tax exemptions on their purchases, currently a cost close to $200 million. This is direct relief to middle class homeowners who have carried the property tax burden in Minnesota for too long.
Beyond this reform and relief is a bill that supports economic development and grows jobs statewide. The state-local partnerships created in this legislation focus on several major projects, many of which include job-creation goals and local contribution requirements. For example, the bill invests in Rochester’s infrastructure so the city can continue to grow as fast as Minnesota’s largest employer grows. “The health and medical care provided by the Mayo Clinic is invaluable to Minnesota. Supporting Rochester’s development now means a substantial return in the future,” continued Sen. Skoe.
Increased investments in research and development will help Minnesota businesses stay competitive in a 21st century economy. Similarly, the bill provides incentives for startup enterprises and for existing businesses to expand in Minnesota.
The Senate tax bill is the result of listening to the concerns of Minnesotans across the entire state. “This bill is about balancing the state’s $627 million budget shortfall and investing in state priorities, like all-day K and higher education,” Sen. Skoe commented. “This bill is about making bold changes to our state’s outdated sales tax system so we can get Minnesota out of this cycle of continuing budget deficits. This is about alleviating the property tax burden on middle class homeowners and businesses. And finally, this bill is about creating thousands of jobs and getting hardworking Minnesotans back to work.”