(C) Minnesota Reformer This story was originally published by Minnesota Reformer and is unaltered. . . . . . . . . . . Takeaways from the House DFL’s tax plan [1] ['Michelle Griffith', 'More From Author', '- April'] Date: 2023-04-17 House Democrats released their tax package on Monday, proposing modest one-time tax rebate checks, exempting some Minnesotans from state tax on Social Security benefits and increasing taxes for the wealthiest Minnesotans. The tax plan’s release kicks off weeks of final negotiations over spending, tax cuts and increases amid the state’s $17.5 billion budget surplus. Senate Democrats will release their plan this week, and DFL leaders — with input from Gov. Tim Walz — will need to finalize the details before the Legislature’s last day, May 22. Republicans in both chambers criticized the DFL’s tax plans, deploring the tax increases especially. Senate Republicans demanded big, permanent tax cuts, and opted to kill funding for infrastructure projects in their own districts when Democrats refused. At the same time House Democrats released their tax package, Senate Republicans held a press conference where they condemned the tax increases. “The Democrat agenda will empty every Minnesotan’s pocketbook to support their out-of-control spending agenda,” Senate Minority Leader Mark Johnson, R-East Grand Forks, said in a statement. “The Democrats’ budget will lead to higher taxes now, and even higher taxes in the future to support their explosive growth in state government.” Here are takeaways from the House DFL’s tax plan: Rebate checks won’t pay the rent The DFL House tax package includes one-time rebate checks, though they are much smaller than what Walz proposed: $275 checks for single filers making less than $75,000 and $550 for married filers making less than $150,000 annually. There’s a hard ceiling on the payments, meaning Minnesotans who make $1 over the thresholds wouldn’t be eligible for the cash. Walz’s plan, by contrast, included $2,000 checks to Minnesota families with income below $150,000 and $1,000 checks for single filers making less than $75,000. “We really focused on getting money into the pockets of the Minnesotans who need it the most, and I think the way the rebate is designed aligns with that goal,” said Rep. Aisha Gomez, DFL-Minneapolis, at a Monday press conference. Over 2.5 million Minnesotans would receive a rebate check, Gomez said, costing the state about $1.25 billion. Minnesotans may get larger rebate checks in the end: The House and Senate will negotiate a final bill in the coming weeks. The House tax bill also expands the child and working family tax credit to $1,175 per child with no cap on the number of children, with a phaseout beginning at a $35,000 annual income for joint filers and a full phaseout at $50,000 to $75,000 range, depending on filing status and the number of children. This proposal costs about $730 million for fiscal years 2024-2025. Eliminating tax on majority of Social Security benefits House Democrats want to eliminate the state’s tax on Social Security benefits for more Minnesotans. Currently over 50% of Minnesotans don’t pay state tax on their benefits, and the House DFL’s proposal would increase it to 76%. Married joint filers with an adjusted gross income under $100,000 could exempt all their benefits from the state’s tax on Social Security, and the same goes for single filers who make under $78,000. Gomez said this tax exemption would cost the state about $500 million per biennium, compared to over $1.2 billion to exempt the tax on all who receive benefits. She said the goal was to give tax cuts to Minnesotans who need it most rather than wealthy seniors. “That was the tradeoff between doing a full Social Security exemption and then investing in these other programs and these other Minnesotans who really need the help at this time,” Gomez said. A few Democrats, including Sen. Aric Putnam, DFL-St. Cloud, and Rep. Dave Lislegard, DFL-Aurora, have signed onto bills that would fully eliminate the tax on Social Security. A “millionaire tax” The tax plan includes higher taxes on wealthy Minnesotans by creating a fifth state income tax tier. The new tier would establish a 10.85% tax rate on a Minnesotan’s’ taxable income above $1 million for married joint filers; $600,000 for single filers; and $800,000 for heads of households. The Department of Revenue estimates this new tax would affect 0.8% of Minnesota taxpayers, or about 24,000 people, and generate about $530 million in fiscal years 2024-2025. “We’re proposing to make the tax code more fair and more progressive to provide sustainable funding for education, health care, transportation and so much more,” House Speaker Melissa Hortman, DFL-Brooklyn Park, said Monday. The majority of the state’s $17.5 billion budget surplus is one-time money, so Democrats argue that the state needs to generate more revenue even with the massive surplus. No local sales tax increases The 300-page tax package includes zero hikes on local sales taxes, despite over three dozen local sales tax proposals totaling $2.7 billion breezing through the Senate with bipartisan support. Democrats and Republicans are asking for sales hikes in their districts to pay for new jails, road repair and park improvements. Gomez declined to include any local sales tax increases, which need approval from the Legislature and local voters. “I personally feel that somebody’s ability to have access to good public services shouldn’t depend on whether they have a mall in their community or a big retail base,” Gomez said. “Public goods should be available to all regardless of their geography.” The House tax package does increase local and county government aid programs by $100 million each. The state aid helps cities keep property taxes low because they can use the funds for public safety, infrastructure, housing and economic development, among other initiatives. Over 90% of cities in Minnesota receive funds through the state’s local government aid program, according to the Coalition of Greater Minnesota Cities. Beginning in 2026, the governmental aid formulas would be adjusted for inflation by at least 2.5% annually but not greater than 5%. 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