A sure sign of spring is the emergence of omnibus tax bills in both the House and Senate. This week, House Taxes Committee Chair Paul Marquart (DFL-Dilworth) unveiled his version, HF 991. The tax bill will set off one of the key points of contention as the Legislature and Governor attempt to craft next biennium’s budget: tax relief for some and tax increases for others. Naturally, almost everyone likes the tax relief, but the size and scope of the measures are up for debate. The tax increases, however, are squarely opposed by Republican members of the House and the GOP-dominated Senate.
The version of the House tax bill making its way through committee provides some relief to businesses that received PPP loans that have since been forgiven, though not to the full extent that they will for federal tax purposes. The House bill also provides relief by excluding a certain amount of income from taxation for individuals who received unemployment insurance (UI) in 2020. This provision matches the federal measure for UI. There are several smaller tax relief measures throughout the bill as well.
The major revenue raiser in the bill is the creation of a fifth tier on the state’s income tax for incomes in excess of $500,000 for single filers and $1 million for married joint filers. This would raise approximately $560 million in the next biennium. The bill includes numerous other tax changes for individuals and corporations that raise additional revenue as well.
There are several provisions in the bill that are helpful to Greater Minnesota cities. These include a sales tax exemption on materials for the construction of public safety facilities, expansion of the market value exclusion from the state’s commercial industrial property tax to help small businesses, creation of fire protection districts, numerous local option sales taxes, and additional flexibility in the use of Tax Increment Financing (TIF). Additional details can be seen in this letter to the committee from CGMC.
The House tax bill includes no changes to Local Government Aid, with the exception of three individual cities who receive a temporary increase in LGA in lieu of having their proposals for local option sales taxes included in the bill.
It is likely that the Senate will unveil its tax bill next week or early the week after. We will keep you updated as the Legislature continues to navigate through the budget process.
