Minnesota’s House and Senate have each passed gigantic tax increases to close a $6.4 billion budget deficit of their own creation. The Senate plan (SF2074) calls for across the board income tax increases and a new top tax bracket of 9.25% to collect $2 billion in new revenues. The House plan (HF2323) is a patchwork of tax hikes on income, tobacco, alcohol, recreational vehicles, and even includes a tax on homeowners who have higher energy (natural gas) use during winter months (shame on you for using your furnace when the temperature is below zero).

 

Property tax caps are swept away and counties will be given the option to increase local sales taxes by .5%.

 

The House bill also eliminates some pretty substantial tax deductions, like the mortgage interest deduction and education tax credits. A slew of other changes remove subtractions from federal taxable income and throw in some additions, like motor vehicle and property taxes paid, and some charitable contributions. All of this has the effect of inflating the amount of personal income that the state will compute taxes on. The House tax bill also establishes a new top tax rate of 9% on income over $169,000 (or $300,000 for married couples filing a joint return).

 

Because the House and Senate plans are different, their next stop is a conference committee, where members of the House and Senate will put their heads together to reconcile differences in the bills (and likely make the tax-hikes even bigger) before sending the merged bill to the governor’s desk.

 

These bills do little to nothing to address the fundamental problem of government over-spending. They rely on the taxpayer’s wallet and accounting shifts (delaying payment until later) and one-time money, meaning the legislators will be back looking for even more tax dollars in two years when they have to make good on delayed payments and one-time money is no longer available. In the face of the state’s biggest-ever budget deficit, these legislators haven’t even given any consideration to substantial spending cuts. They’ve spent the state into the red and rather than cut back, they’re asking us to cut our family budgets back even more.

Take Action: Attend the Tax Cut Rally on Saturday, May 2nd.