Minnesota taxpayers can expect rebates under $3B bill nearing passage

ST. PAUL, Minn. (AP) — Minnesota taxpayers can expect rebate checks in the next few months and struggling families with children are likely to get additional relief under a $3 billion tax cut bill nearing approval in the Legislature.

Democratic Senate Tax Committee Chair Ann Rest, of New Hope, said after House and Senate negotiators unveiled the framework of the bill Wednesday that she was “extremely proud” of the measure, adding that it will provide significant tax relief for families and children.

Her House counterpart, Democratic Rep. Aisha Gomez of Minneapolis, said the bill will “significantly cut child poverty.”

“There are just really incredible transformational things in this bill that will benefit people across our state,” Gomez said.

The bill also includes about $1 billion in tax increases for the next two-year budget, which takes effect July 1. They include a tax aimed at companies with international earnings, plus changes aimed at some higher income earners. And it will authorize some communities to raise local sales taxes.

Republicans, who are in the minority in both chambers, were quick to object to those hikes given that the state had a $17.5 billion budget surplus earlier in the session. They’ve called unsuccessfully for much deeper tax cuts and less new spending. And they pointed out that other major budget bills still being negotiated, including the transportation and housing bills that contain their own tax and fee increases. A gas tax increase and fees on retail deliveries to raise more money for roads and bridges have been under discussion.

“Minnesotans should feel outraged about what’s happening at the State Capitol right now. It’s runaway tax season down here,” Senate Minority Leader Mark Johnson, of East Grand Forks, said at a news conference Thursday.

Republicans have been fuming over being shut out of most of the budget negotiations while Democrats work out the details of the big bills, often behind closed doors. They’ve expressed their discontent by forcing lengthy debates, including an all-nighter in the Senate earlier this week.

With a Monday adjournment deadline, the tax bill is one of the most important remaining pieces of a budget that’s expected to come in at around $65 million, which would be a big jump from the current $55 billion budget that runs through June.

As of Thursday afternoon, the House and Senate had sent Democratic Gov. Tim Walz 11 budget bills, Democratic House Speaker Melissa Hortman, of Brooklyn Park, told reporters.

The Senate made it 12 Thursday evening when it gave final approval to a bill creating a paid family and medical leave program for most Minnesota workers — a top Democratic priority for the session — on a 34-31 party-line vote. The House passed it Wednesday evening. Business groups fought it because the program will be funded by a new payroll tax.

“This bill is for every Minnesotan. It is sustainable, it works in 11 other states that have it, and it is sound good policy,” Democratic Sen. Erin Maye Quade, of Apple Valley, said just before the vote.

Four more budget bills were complete but still awaiting final floor action, and four others were still in negotiations, Hortman said. But the speaker acknowledged that the clock will run out for the year on a bill to legalize sports betting.

“We heard voters tell us they were tired of gridlock, and we have continued to show throughout this session that we came here ready to work on Day One,” said Democratic Senate Majority Leader Kari Dziedzic, of Minneapolis.

The tax bill conference committee was expected to give its final approval to its package Thursday night and send it to the House and Senate floors for final approval.

Although Walz had proposed rebates of $1,000 for individuals and $2,000 for couples, he told reporters Wednesday that he was fine with the compromise and plans to sign the bill.

The one-time rebates will mean $260 payments to individuals who made up to $75,000 last year or $520 for married couples who earned up to $150,000. Qualifying families could also get $260 per child up to three, which could add up to a $1,300 rebate for a family of five.

Families with children could get even more via other per-child and child care tax credits that are aimed at lower- and middle-income families. Couples who earn up to $35,000 would get $1,750 per dependent, but that would decrease as incomes rise and phase out at $90,000.

Around 80% of Minnesotans who get Social Security will be exempt from taxes on that income, up from around 50% currently. Couples making under $100,000 would be fully exempt, with a partial exemption for incomes up to $140,000. There’s also a break for people receiving public pension benefits.

Homeowners and renters would also get one-time boosts of around 20% in their property tax refunds.

The plan also includes $300 million for public safety assistance for communities and $160 million more in state aid for cities and counties.

The tax bill does not contain a House-backed fifth income tax bracket on incomes over $1 million, a hike that was dropped during the negotiations.