House Tax bill focuses on tax cuts
The House omnibus Tax bill includes income tax cuts aimed at low and middle income Minnesotans, a reduction in the research and development credit for businesses and forbids cities and counties from raising property taxes if they take local government aid.
House Tax Chair Greg Davids posted his bill tonight. Despite the state facing a $5 billion projected budget deficit, Davids is proposing to reduce the state's income tax rate even further. The plan reduces the lower income tax rate from 5.35% to 5.25% in Tax year 2012. It would reduce the rate again to 5.15% in Tax year 2012 and again from 5.1% to 4.75% in Tax Year 2014.
Davids also wants to reduce the middle income tax rate from 7.05% to 6.85% in Tax Year 2012 and from 6.85% to 6.75% in Tax Year 2014. There is no reduction in the rate in Tax year 2013.
Republicans say this proposal is aimed at low and middle income Minnesotans but top earners will benefit from it as well. That's because wealthier Minnesotans pay the top rate of 7.85% only on income above the middle-income rate threshold. For example, married couples who have an after tax income of $150,000 a year would pay the 7.85% rate on just $17,7800 of their income since the top income threshold on the middle rate is $132,220.
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The proposal also increases the Research and Development Tax Credit for businesses and reduces the statewide property tax for commercial industrial properties.
The proposal does increase taxes on a specific tobacco product. It requires moist snuff to be taxed in a different way than other tobacco products. That change would generate an additional $18 million over the next two years.
The plan also requires Minnesota's Revenue Commissioner to initiate negotiations to restart the reciprocity agreement with Wisconsin. It also removes language allowed the Revenue Commissioner from making the decision if it's in the best interest of the state. It also establishes the length of time that Wisconsin has to make good on future reciprocity payments.
Davids will go through the bill on Monday. His bill is also likely to include proposals put forward by the House Property Tax Division. The chair of that committee is proposing to eventually eliminate local government aid to cities in the Twin Cities suburbs and Minneapolis, St. Paul and Duluth.
You can read the Tax Omnibus Bill here.
You can read the spreadsheet here.