Governor’s Budget Proposal

Tax Credits for Working Families

Gov. Dayton’s balanced budget proposal would expand the Dependent Care Tax Credit to nearly 130,000 families and bring Minnesota’s credit almost entirely to the federal level. The credit is targeted at families with daycare expenses, but it 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 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.

The Senate’s work last session included expanding the Working Family Credit, which increased tax credits by an average $334 for 347,000 Minnesotans and expanded the credit to 16,000 newly eligible families, substantially decreasing the tax burden for low-income Minnesotans. The governor’s proposal would invest an additional $83 million in tax relief for low- and middle-income families receiving the Working Family Credit statewide and help more than 287,000 families save an average $138.

The governor’s budget also proposes investing $11 million in expanding the existing K-12 Education Tax Credit to 16,800 more Minnesota families, saving them an estimated $322 per year for expenses relating to education. Eligible families could receive up to $1,000 for each child to offset expenses for textbooks, tutoring, computers, transportation, and other eligible expenses.

Closing Corporate Tax Loopholes

After raising $424 million in 2014-2015 by closing a variety of corporate tax loopholes, Gov. 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.

Railroad Property Taxes

Increased rail traffic presents new costs and concerns for Minnesota’s cities, counties, and townships. Because they cover so many jurisdictions, railroads must be assessed by the state instead of by local governments. The governor’s budget proposal changes how rail property is assessed by updating methodologies to consider the modern rail economy. The proposed 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 next biennium and provide significant relief to local governments.

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