3/7/2014 7:39:00 PM House passes $500 million tax cut Legislators moving quickly on middle class tax cuts
St Paul, MN - Today, March 7, the House passed legislation to cut taxes for middle class families and to repeal business-to-business taxes. The $514 million tax cut bill will reduce taxes for hundreds of thousands of Minnesotans, largely by conforming to federal tax changes. Less than two weeks into the session, the House is moving at a fast pace to ensure families and businesses see the benefits of these tax cuts. State Representative Shannon Savick (DFL - Wells), who voted in favor of the bill, said it was important to move quickly.
"There is no reason to wait on passing these tax cuts," said Savick. "The people who helped create this budget surplus really are the ones who deserve these cuts, and that's our middle class families, our businesses, and our farmers."
Whenever Congress changes federal tax law, the Legislature must decide whether to conform to the changes at the state level or not. Last session the House included federal tax conformity for tax year 2013 and beyond. However, this did not end up in the final budget signed into law. The legislation passed by the House Tax Committee today would provide $200 million in middle class tax cuts through permanent federal tax conformity. Those tax cuts include:
· $111 million for middle income married families (conforms to federal tax code to eliminate 'Marriage Penalty' )
o 650,000 families will see an average tax decrease of $115.
· $36 million for working families (Increase phase-out range for Working Family Credit to match Earned Income Tax Credit (EITC))
o More than 50,000 working families will see an average decrease of $300.
· $26.4 million for students, parents paying for college and students paying off loans (Education-related provisions including qualified tuition and related expenses)
· $3.9 million for new homeowners (mortgage insurance premiums deduction)
o 80,000 new homeowners will see an average tax cut of $60.
· $7.2 million for homeowners that refinanced or had a short sale
· $1.8 million for Minnesota families with dependents
o 25,000 families with household incomes below $38,570 will see a $65 tax decrease.
· $400,000 for adopting families (employer- provided adoption assistance exclusion)
· $1.1 million for 60,0000 teachers (Classroom expense deduction for educators)
(Source: Non-partisan House Research)
The House Tax bill also would repeal three business-to-business taxes (warehousing and storage services, commercial equipment repair (including farm machinery) and telecommunications equipment) that were passed as part of the 2013 budget. Last year those taxes were part of a Senate package that paid for an upfront capital sales exemption for businesses and provided property tax relief by eliminating sales taxes for cities and counties. Then, the legislature faced a $600 million budget deficit and owed our schools $800 million. Since, Minnesota's economy has improved and the state budget has stabilized. The state now has a budget surplus of $1.23 billion for this biennium, with an even larger surplus projected for the future budget.
"This surplus is the result of the hard work of Minnesotans," said Savick. "With Minnesota's economy doing well, we want to do everything we can to make sure businesses and farmers can continue to improve it even further."
The repeal of the business-to-business taxes total $314 million. The bill allows taxpayers to apply for a refund for any taxes paid since they took effect. Two of the taxes went into effect on July 1, 2013. The warehouse tax will take effect on April 1, 2014, adding to the urgency to pass this tax cut bill.