April 23, 2018
HOUSE REPUBLICANS UNVEIL TAX PLAN; SENATE PLAN EXPECTED THIS WEEK
The Legislature is entering its final stretch following the final policy committee deadline April 20. All budget bills are through their respective budget committees and on the way to the House Ways and Means or Senate Finance committees for final review. The bills will be ready for floor action starting this week. The House and Senate will now start longer floor sessions to process the bills that have made it through the committees. The Legislature faces a constitutional adjournment of May 21.
House Republicans released their tax proposal Saturday with their recommendations for updating Minnesota law following the federal tax reform. The bill proposes the first rate reductions for both corporate and individual income taxpayers since 2000. The House proposal would result in a net tax decrease of $112 million in FY 2018/19 and $34 million in FY 2020/21. The major tax changes would:
- Move Minnesota's individual income-tax starting point to the federal adjusted gross income versus current law of federal taxable income. Minnesota is one of only six states that uses federal taxable income as the starting point. Federal tax income definition included federal changes for standard deduction and personal exemptions.
- Enact Minnesota's own standard deduction and personal exemptions and no longer conform to federal law for those provisions.
- Reduce the Individual income tax rate for the state's second lowest bracket from its current 7.05% to 7% in 2018; 6.9% in 2019 and 6.75% in 2020. This bracket is for incomes between $37,851 and $150,380 for married filing joint filers ($25,881 to $85,060 for single filers). Minnesota has four rates of 5.35%; 7.05%; 7.85% and 9.85%. Click here for detailed information on all Minnesota rates and brackets.
- Conform fully with Section 179 federal rules, allowing businesses to expense the cost of equipment in the same year it is purchased.
- Lower corporate tax rate from current 9.8% to 9.64% for 2018 and 2019 and then 9.06% in 2020 and beyond.
- Repeal corporate alternative minimum tax to comply with federal changes.
HF 4385 will be the vehicle bill for the tax bill. Click here for the House tax proposal (insert link) and spreadsheet (insert link). The House is scheduled to hold hearings on its proposal this week. The Senate is expected to unveil its proposal by the end of the week.
The federal tax reform presents an opportunity – and need – to rightsize the state's tax system for the benefit of employers and employees by enacting pro-growth tax reforms. We are pleased with the tax relief measures contained in the House proposal. This is a great first step in moving Minnesota to a competitive tax structure.
In the news: Editorial: Seize chance to right-size Minnesota taxes; Opportunity now is rare, chamber says (Duluth News Tribune)
In the news: Editorial counterpoint, Dan Smith, Cooperative Network, Tim Mackey, Laborers Council of MN and ND, and Doug Loon, Minnesota Chamber: Constitutional amendment on transportation funding is needed, and sensible (Minneapolis Star Tribune)
WEEKLY 'AT THE CAPITOL' VIDEO
Click here for a report Beth Kadoun, our vice president of tax and fiscal policy.
Independent Health Policy Commission (HF 3823, Schomacker, R-Luverne/SF 3417. Benson, R-Ham Lake): WE SUPPORT
Rising health care costs pose significant challenges for employers, employees and the state. This bill would establish an independent commission to review and recommend how Minnesota can better achieve improved access, care and health outcomes at lower costs through our commercial market and public programs. The Senate version was included in SF 2505 (Benson, R-Ham Lake), which will serve as the Senate's supplemental health and human services budget bill. SF 2505 was approved by the Senate Health and Human Services Finance Committee and is now awaiting approval by the Finance Committee before being brought to the House floor.
Child-care provider grants (HF 3605, Baker, R-Willmar/SF 3316, Utke, R-Park Rapids): WE SUPPORT
This bill appropriates money for grants to increase the supply of child care in communities with a documented shortage of providers, with a 50-percent match requirement. The Senate bill was referred to the Human Services Reform Finance and Policy Committee. The House bill with a $750,000 appropriation is included in the omnibus job growth and energy affordability policy and finance omnibus legislation, HF 4289.
Environmental permitting (HF 3120, Fabian, R-Roseau/, Ingebrigtsen, R-Alexandria): WE SUPPORT
This bill contains several provisions supported by the Minnesota Chamber to further streamline environmental review and permitting at state agencies. It makes changes to the wetland mitigation law, establishes a peer review for new water quality standards, requires legislative approval for water quality fee increases and creates a 16-year permit for wastewater treatment plants. Both the House and Senate omnibus environment and natural resources finance bills contain our policy bill and have been sent to the House Ways and Means Committee and Senate Finance Committee.