Senator Chuck Wiger: Tax Conformity Needed
The issue of conforming state taxes with the changes in federal taxes is front and center at the Legislature.
The burning question is: who benefits most from the changes?
First, a little history.
In December, Congress and the president passed the biggest overhaul to the nation’s tax code since the 1980s. Corporate tax rates were cut. The standard deductions for individuals and families were doubled. No committee hearings were held.
The problem is, Minnesota’s tax code does not line up neatly with the federal tax code. Not by a long shot. It is left to Minnesota lawmakers to bring the two into alignment. With no action, the state tax code will become a confusing maze for taxpayers.
The goal is to pass a tax bill that is fair and aligns the governor’s tax philosophy with the vision of the House and Senate. Ideally, all three sides want to come together and pass a single plan by May 21, the day the Legislature must adjourn.
Here is a look at the three tax plans.
Gov. Dayton’s Plan
The governor proposes establishing a new tax credit for Minnesotans who make less than $140,000 per year, or $280,000 for married filers. He also wants to extend the working family tax credit to more people. Further, he wants to use federal gross adjusted income instead of federal taxable income as a starting point to calculate deductions.
It is estimated that Dayton’s new tax credit would cut taxes an average $117 for more than 1.9 million Minnesotans. Expanding the working family credit would cut an average of $160 more for 329,000 others.
The House Plan
This plan has many features of the governor’s plan. It also includes an income tax cut for the second tier of individuals and families, lowering the rate from 7.05 percent to 6.75 percent over a two-year period. Those two provisions would provide a tax cut to about 2.1 million taxpayers. Corporate rates would also go down under the House plan from 9.8 to 9.06 percent over two years.
The Senate Plan
This bill includes an income tax cut for the lowest-income families and individuals, reducing the first-tier rate from 5.35 percent to 5.1 percent. The bill also would require the state to cut the state’s income tax rate and corporate tax rates by one-tenth of 1percent if there is a surplus of more than $127 million.
Under this plan, 2.1 million Minnesotans would get a tax cut next year of up to $150. About 470,000 taxpayers would see no change in their returns at all, and about 2,500 others would see an increase of up to $150.
Under the Senate plan, joint filers:
- Earning $20,000 would receive a $50 tax cut
- Earning $40,000 would receive a $95 tax cut
- Earning $150,000 would receive a $95 tax cut
Tax cuts are fine as long as short-term gains do not result in long-term pain. I do not want to starve schools, roads and other state services.
To benefit our schools, I strongly supported an amendment on the Senate floor that would:
- Convert existing safe schools levy to all-aid program
- Increase the amount of revenue available to districts
- Make charter schools newly-eligible for safe schools revenue
- Increase the amount of pass-through revenue available to intermediate districts
- Make other cooperative units eligible for pass-through revenue
Eventually we will see which provisions will become law. We need a compromise that reflects fairness and balance. A conference committee of the House and Senate will determine the final shape of the bill. Finally, to become law, Gov. Dayton will have to sign it.
In 2011, our economy was in crisis and our budget was a mess. Minnesota’s schools were under-funded, 202,000 people were out of work and taxes favored the wealthy.
Now our economy is strong, unemployment reached a 17-year low, and our schools have seen new investments. Still, there is more work to do to make sure every Minnesotan shares in our state’s prosperity.
I want a win for working families, businesses, senior citizens and veterans. I want a win for public education and students.
I urge everyone to pay close attention to actions at the Legislature from now until May 21. It is an honor to serve you.
As always, please contact me with questions or suggestions regarding any issue. I encourage you to visit me at the Minnesota Senate Building, Room 2219. Let me know if you would like me to stop by your home or apartment. I can be reached by email at firstname.lastname@example.org, and by phone at 651-296-6820, or 651-770-0283.