 Brooklyn Park Town Hall
Sunday, February 16th, 2:00-3:30 pm
Brooklyn Park Library
Mississippi River Room, 8500 W. Broadway Ave., Brooklyn Park, MN 55443
Minnesota’s 2019 Tax Law
Minnesota’s Legislature came together last year to craft a compromise tax bill that helps Minnesotans across the state. While not as robust or as far reaching as Governor Walz’s and the House DFL’s proposals in closing corporate tax loopholes or asking the wealthy to pay their fair share, we reached a compromise to meet the needs of Minnesotans.
The new tax law invests in families, seniors, farmers, small businesses, and communities across Minnesota. The law cuts taxes for the middle class and preserves funding for affordable health care for 1.2 million Minnesotans.
The 2019 tax law was a good bipartisan compromise.
There’s more work to do to make our tax system fairer, fund the priorities of Minnesotans, and build a Minnesota that works better for all of us.
Here are some of the highlights of our new law:
Middle Class Tax Cuts: The proposal reduces the 2nd Income Tax Bracket rate from 7.05% to 6.8% permanently, beginning in Tax Year 2019. The House proposal was to increase the first tier bracket which is a more effective way of delivering tax cuts to low income households. Furthermore, the standard deduction expansion also included in this proposal is a much more effective tool for delivering meaningful tax cuts for low and middle income tax filers.
Social Security Tax Cuts: Increases the Minnesota Social Security subtraction for married couples filing joint returns, and for single and head of household taxpayers. The bill also reduces the phaseout thresholds for the subtraction such that taxpayers in the phaseout range would not receive the full amount of the increase in the maximum subtraction.
Preserving affordable health care:
The Health Care Provider Tax helps provide affordable health care access for 1.2 million Minnesotans and ongoing funding for Minnesotans’ care, including children, seniors, and people with disabilities. Preserving this funding was a critical component of the bipartisan budget compromise between the House, Senate, and Governor.
Federal Conformity: By selectively conforming to federal tax law, the new state tax law ensures that tax filing season is simplified and beneficial to most Minnesota tax payers. In particular, conformity resulted in certain changes that would not otherwise have occurred:
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Standard Deduction: The new law raises the married standard deduction to $24,400 (matching the federal amount) which will cut taxes by $134 million for over 1.9 million taxpayers. This will also simplify and ease tax filing for the vast majority of Minnesotans who will benefit greatly from opting for the standard deduction. The average tax cut is $160 – about a 7% tax cut for the median household income.
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Section 179: The proposal conforms to the federal expansion of allowances for section 179 expensing starting with taxable year 2019. The deduction allows businesses to expense up to $1 million of qualifying equipment purchases in the first year placed in service. The proposal retains the 80% addback. This provision greatly benefits farms and small-to-mid-sized businesses over the long term.
Working Family Credit: The proposal expands the Working Family Credit. The law expands the credit for taxpayers with zero children and adds an additional tier for taxpayers with three or more children. It creates significant investments in the Working Family Credit that will provide tax cuts to working parents, grandparents, and individuals. Income from refundable tax credits for low-income workers and their households are effective tools for moving individuals and families out of poverty. They are only available for those who are working already – reflecting Minnesota commitment to hard workers, families, and children.
Angel Investment Tax Credit: The Angel Tax Credit program has resulted in over $421 million in private investment in Minnesota startups, leveraged by the state’s issuance of $101 million in tax credits to angel investors. The program spurs economic growth and builds on Minnesota’s existing ecosystem of high tech, high innovation companies, including the state’s clean energy technology companies. The policy changes included in this proposal will increase utilization of the program among targeted group businesses, including those owned by people of color, women-owned businesses, veteran-owned businesses, businesses owned by people with disabilities, and/or businesses in Greater Minnesota.
Expanding Local Government Aid (LGA) & County Program Aid (CPA): The city LGA appropriation and CPA are each increased by about $26 million in FY 20 and then increased to approximately $30 million beginning in FY21. These investments in our local governments will help hold down property taxes while directly benefiting Minnesotans everywhere.
Helping farm families and rural communities: Phases in increases to the school building bond agricultural credit from 40% to 70% of the tax on the property attributable to school district bonded debt levies. The credit is available to all property classified as agricultural, excluding the house, garage, and surrounding one acre of land of an agricultural homestead. This increases the Credit to 70% - a 75% increase. Farmers will eventually see a property tax cut of 50% on their existing school district building bonds and a 70% property tax cut on new school building bonds.
Supporting our schools: Increases Referendum Equalization by $10 million in FY19-21 and $20 million in FY22-23. Opposite to the debt service levy aid program, operating referendum equalization aid is designed to provide districts with more help on their initial $300 per-pupil levy, with districts needing to take on more and more of the levy as they increase the per-pupil amount. The bottom line is that this proposal is a win for schools and will help hold down property taxes.
Statewide Business Property Levy Reduction: A key provision that the Senate negotiated, the proposal reduces the overall amount of the State General Levy that is paid by commercial and industrial (C/I) businesses and seasonal-recreational property (SR). The commercial-industrial levy amount is reduced by $47.5 million, and the seasonal-recreational levy amount is reduced by $2.5 million effective beginning with taxes payable in 2020.
As always, please contact me anytime with your input. I appreciate hearing from you! You can reach me at 651-296-4280 or rep.melissa.hortman@house.mn. You can also keep up with what’s happening at the Capitol by liking my legislative Facebook page. Thank you.
Sincerely,
Melissa Hortman
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