Democrats spell out $1.2 billion Minnesota tax increase
ST. PAUL — Democrats say a tax bill likely to pass the Minnesota House in coming weeks would give schools much of the $1.2 billion it would raise.
State House Democrats released their tax plan Monday, April 8, with much of the money coming from imposing income taxes on the foreign profits of Minnesota corporations.
House Tax Chairman Paul Marquart, DFL-Dilworth, said that changing the foreign corporation “loophole” would bring in $700 million in the next four years. Much of the rest of the money is found by making state law conform to federal law with its new tax cuts.
“It sets the foundation of what we really need to do in this state,” Marquart said, referring to things such as increasing spending for education, health and other programs that benefit working Minnesotans and senior citizens.
Republicans complained that the tax increase would hurt Minnesotans.
“The tax increases proposed by the House DFL will hit every Minnesotan, young and old, at every income level,” John Phelan of the conservative Center of the American Experiment said. “We’ll pay more in gas taxes, tab fees, income taxes, capital gains taxes, death taxes and sick taxes.”
Senate Tax Chairman Roger Chamberlain, R-Lino Lakes, agreed with Phelan that all Minnesotans would pay more tax, including a proposed gasoline tax increase. Democrats also would keep in place a tax on medical bills that is due to expire.
“The House tax plan is disastrous and will lead to ruin for this state,” Chamberlain said.
Marquart said a family of four would pay no taxes on its first $32,900 of income. That would be the third-highest income in the country without being taxed.
He said Minnesota taxes would be simpler under the House plan because 93 percent of taxpayers likely would use standard deductions.
Farmers would benefit, he said, with a provision Democrats support to increase the value of farmland that would not be taxed on school construction bonds. In his west-central Minnesota district, it would mean the current $10-per-acre average credit would rise to $13.
Rural school districts say that if farmers pay less to fund construction, they will have an easier time getting voter support.
The school bond provision would apply to both existing and future construction projects.
Chamberlain, however, said the higher bond credit is an example of what Democrats are doing with several taxes: giving “crumbs” to some Minnesotans while making them and others pay higher taxes in other ways, such as paying for tax increases businesses would pass on to the buying public.
DFL leaders said two-thirds of Minnesota taxpayers would receive tax cuts thanks to higher standard deductions. Another provision would provide more than $100 on average to working families via the working families tax credit.
Cities and counties would get $73 million more in the next two years in increased state aid.
Also, Marquart said, 56 percent of Minnesota Social Security recipients would pay no income tax on the federal payments. Democrats also say their legislation would cut property taxes.
Democrats said part of their bill attempts to counteract the new Republican-written federal tax law that they say hits the poor hard.
Higher taxes largely would go to fund education, Democrats said. Schools would get a 3 percent per-pupil raise in the year beginning July 1 and a 2 percent boost the following year.
House Speaker Melissa Hortman, D-Brooklyn Park, said without the new funding class sizes would increase, among other issues schools would face.
Marquart’s Tax Committee begins looking over the bill Tuesday. Chamberlain said his tax bill will come out in a couple of weeks.
Democratic Gov. Tim Walz already has released his tax plan, which comes much closer to the House plan than GOP senators’ wishes.
Normally, once the House and Senate pass conflicting bills they assign negotiators to work out compromises. In most sessions, talk among legislative leaders and the governor are needed to work out a final deal.