Minnesota House Democratic tax bill holds big cuts and hikes

Minnesota House Democrats rolled out their main tax bill of the session Monday, proposing nearly $3 billion in breaks for the largest tax cut in state history, while minority Republicans noted it also contains substantial tax hikes despite an enormous budget surplus.

“Our tax bill takes steps to make our tax system more fair and more equitable, and fund the priorities that Minnesotans value most, both now and into the future,” House Speaker Melissa Hortman, of Brooklyn Park, said at a news conference.

The speaker pointed out that most of the state’s $17.5 billion surplus is one-time money. Sustainable increased funding for education, health care, transportation, economic security, and community safety and vitality will require ongoing revenue sources, she told reporters.

The House plan sets the stage for negotiations with Senate Democratic counterparts and Democratic Gov. Tim Walz during the remaining weeks of the session. Some highlights of the proposal include:

—Full exemption of Social Security income from taxes for joint filers earning less than $100,000 a year, or $78,000 for singles, meaning 76% of seniors would pay no tax at all on their benefits, compared with the 52% who are now exempt.

—Direct one-time rebates of $275 per person adult and child in families making less than $150,000 a year, capped at three dependents, that would benefit 2.5 million Minnesotans.

—An expanded and simplified credit of up to $1,175 per child, which the leaders said would benefit more than 1 million families while reducing child poverty by 23%.

—A new “millionaires tax” adding a new top tax rate of 10.85% on joint filers making more than $1 million a year, or $600,000 for single filers, a 1% bump on top the current top rate, which they said would hit just 0.8% of all filers.

—A worldwide reporting requirement for multinational corporations aimed at capturing profits hidden in offshore tax havens.

—Changes to simplify the state’s renter’s property tax credit and direct an additional $378 million back to renters over the next two years, making the refund easier to claim for 100,000 lower-income renters who don’t currently file for it.

—Expanding the homestead property tax credit for homeowners by another $41 million over two years.

—An added $100 million for local communities and $100 million for counties to help them hold down property taxes.

“The cuts in this bill are targeted to those who need it the most, including seniors living on fixed incomes, families and children living in poverty, and Minnesotans across the state who are facing high property tax bills,” said Rep. Aisha Gomez, of Minneapolis, who chairs the House Taxes Committee.

House Republicans want to see the surplus returned to taxpayers as well as the complete elimination of the tax on Social Security benefits, House Minority Leader Lisa Demuth, of Cold Spring, told reporters.

“This proposal will not only make it harder to recruit talent and businesses to Minnesota but will also make it difficult to convince companies to expand their operations here — further solidifying the state’s reputation for having a hostile business climate,” Charlie Weaver, executive director of the Minnesota Business Partnership, said in a statement.

Senate Democrats, who hold just a one-seat majority, said they’ll unveil their own tax bill “in the coming days.” They provided no details of how it might differ from the House tax bill or Walz’s tax proposal, but said in a statement that it will have “a strong focus on the interests of Minnesota’s middle-income families and individuals.”

Some senators whose victories were crucial to the Democratic takeover of the chamber last November campaigned for complete elimination of the tax on Social Security. Walz proposed bigger rebates of as much as $2,600 per family back in January.

Some other tax and fee increases that Democrats have proposed to fund specific areas — such as housing, public transit, and paid family and medical leave — are contained in other bills moving through the Legislature. A tally released Monday by the Senate Republican minority said the various increases would add up to nearly $10 billion if they all became law.