This morning, State Representative Ann Lenczewski, chair of the House Tax Committee, announced the first part of the House discussion about taxes this session. Lenczewski’s proposal would eliminate numerous individual income and corporate tax benefits that she argues are ineffective, go disproportionately to the wealthy, or that the state just can’t afford anymore. Overall, the plan is intended to be revenue neutral. For example, on the individual income tax side, the numerous tax benefits that are eliminated are replaced by a smaller number of more targeted benefits and a reduction in the state’s income tax. By redirecting these revenues, Lenczewski’s goal is to increase the progressivity of Minnesota’s tax code.
More specifically, on the individual income tax side, the proposal would eliminate at least 17 tax expenditures (including the K-12 subtraction, K-12 education credit, mortgage interest deduction, charitable contribution deductions and refundable dependent care credit) and replace them with just three credits: 1) a reworked mortgage interest credit, 2) a charitable contribution credit, and 3) a Families Know Best credit aimed at low-income families with children. The proposal would also lower the rate on the bottom two brackets of the Minnesota income tax.
On the business side, the proposal would eliminate seven tax expenditures (including the research and development credit, the employer transit pass and corporate franchise tax benefits for JOBZ). Instead, the plan would immediately phase in Single Sales Factor and provide full federal conformity to Section 179 expensing.
The bill was introduced in the House today (HF 1782). However, we’ve also posted a copy of Lenczewski’s PowerPoint presentation on our website. For technical reasons, we’ve had to divide it into three PDFs to post it (part 1, part 2, part 3). I’m sure you want more details – and the PowerPoint provides some, so it’s worth a look.
This isn’t the last we’ll hear on taxes this session. Today’s announcement is really just Part One. Next week, Representative Paul Marquardt, chair of the Property Tax and Local Sales Tax division, will be announcing his property tax plan (Part Two). And later in session, it’s likely the House will also release a proposal for raising revenues to help solve the budget deficit (Part Three).
We’re also hearing the House targets will be out by the end of the week. And the Governor’s supplemental budget could appear any day.