Governor Recommends Tax Relief for Minnesota Families

Gov. Mark Dayton’s balanced budget recommendations would provide tax relief for Minnesotans struggling with the growing cost of childcare, close corporate tax loopholes, and update rail property assessments.

The governor’s proposal would expand the Dependent Care Tax Credit to nearly 100,000 families and bring Minnesota’s credit almost entirely to the federal level. The credit is targeted at families with daycare expenses, but can be applied to any qualified dependent care expenses, including disabled children and aging parents. The budget would also expand the credit to include those with incomes up to $112,000 (or $124,000 for those with more than one child), as opposed to those making less than $39,000 as under current law. This proposal would retain the state’s unique refundable factor, which allows families to receive money back even if they don’t have tax liability.

After raising $424 million in 2014-2015 by closing a variety of corporate tax loopholes, Dayton’s budget adds another $17.4 million with an additional five proposals. This budget will limit corporations from escaping state taxes while making it easier for businesses to access tax credits for research and development.

This budget proposal also changes how rail property is assessed by updating methodologies to consider the modern rail economy. Because they cover so many jurisdictions, railroads must be assessed by the state instead of by local governments. The governor’s budget – like that of other states – modernizes these assessments by allowing rail cars and rolling stock to be considered taxable property. This proposal would raise $33.9 million in the 2016-2017 and provide significant relief to cities, counties and townships.

Other tax changes in the governor’s budget recommendations include:

  • Cigarette smugglers: Institutes penalties for non-compliance with tobacco tax laws, including suspension of retail license and civil and criminal penalties. There are currently no civil penalties for retailers.
  • Senior citizen property taxes: The requirement that a senior must live in the home for 15 years before qualifying for the deferral is reduced to five years.
  • Limiting the Working Family Credit for non-residents: This proposal prohibits Wisconsin residents working in Minnesota from qualifying for the Working Family Credit in both states at the same time.
  • Estate tax recapture: Ensures heirs who inherit a farm and then transfer possession due to eminent domain do not become subject to the recapture tax.
  • Motor vehicle lease tax: The allocation of funds is realigned so the legacy funds receive just 0.375% of sales tax generated by these sales, as intended.
  • Highway user fund: $45,000-$50,000 is used from this fund to align the tax rate for compressed natural gas so it continues to align with the current gas tax rate.
  • Solid waste management tax: This proposal gives the commissioner the authority to determine the conversion rate each year to ensure the rates keep up with the economy.
  • Home office deduction: This proposal simplifies the way in which home office deductions are used to calculate property tax refunds, ensuring all taxpayers who use their home as office space are treated equally.
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