Republicans in the Minnesota Senate are proposing a cut in state income taxes and a mechanism for automatic future cuts.
GOP lawmakers say the tax conformity measure they rolled out Tuesday would protect all but 2,500 Minnesotans from tax increases, following last year’s massive overhaul of the federal tax code.
Sen. Roger Chamberlain, R-Lino Lakes, the chair of the Senate tax committee, said his bill would protect 99.8 percent of state tax filers. He said an estimated 2.1 million would see tax cuts of up to $150, and 470,000 would see no change up or down.
Chamberlain said the bill represents a first step.
“We need reform, we need tax relief for this state, we need economic growth,” Chamberlain said. “There is no doubt about it.”
The Senate bill reduces the first income tax tier from 5.35 percent to 5.1 percent. The benefit would be felt through all income levels.
Deductions for charitable donations, mortgage interest and property taxes would remain, as would the state standard deduction of $13,000. The state personal and dependent exemption would also be preserved.
The plan also establishes triggers that would automatically reduce the income tax rate and corporate rate when there’s an adequate budget surplus.
Chamberlain said he doesn’t see any need for automatic tax increases when there are budget deficits. He believes state taxes are already too high.
“The current tax system in Minnesota is abusive, it punishes success and hard work,” he said. “We need to change that.”
The Senate approach is similar in some ways to the House tax conformity measure that passed Monday. There are also key differences. The House plan cuts the rate for the second lowest income tax tier.
DFL Gov. Mark Dayton is proposing targeted tax credits to low and middle-income families. He is also proposing that a tax on health care providers should not end as currently scheduled next year. Republicans contend that amounts to a big tax increase. But Dayton continues to dispute the point.
“It’s dishonest, that’s the best thing I can say for it, and they know it,” Dayton said.
The Senate tax committee will hear public testimony on the bill Wednesday. A full-Senate vote is expected later this week.
Sen. Ann Rest, DFL-New Hope, said she wants to know more about which taxpayers would see the most benefits under the bill.
“That’s going to be important to the DFLers, to see that it is progressive, that it is not overly rewarding people for their wealth,” Rest said.