Budget and tax fix on state’s priority list
The state of Minnesota and the Tim Walz administration is heading into the new legislative session with some good fiscal news. The Minnesota Management and Budget’s November Budget Forecast indicates the state will have a surplus of $1.5 billion over the next biennium. That should help ease the strain of writing a new two-year budget for the state next year.
The question of what to do with all that will loom large in the upcoming session. Gov.-elect Walz wants to use some of it to finance new initiatives for education, health care and local communities. Republican legislative leaders want tax relief. “We should do more to make sure families can keep theri hard-earned money.”
And that brings up an issue that the Legislature should address ASAP in the session — a bill to bring the state up-to-date with the new federal tax law. Last year the Legislature and Gov. Mark Dayton couldn’t come up with a bill to bring the state into compliance with the new federal tax law, and that is going to hurt a lot of taxpayers.
The Kiplinger Report recently put Minnesota at the top of its list of “the ten least tax-friendly states.” Here’s what they had to say: “The North Star State’s top tax rate of 9.85 percent is one of the highest in the U.S. But what makes Minnesota really stand out — and not in a good way — is its income tax rate of 5.35 percent even for the state’s lowest earners. And thanks to the federal tax overhaul, it could get worse. Minnesota uses federal taxable income as the starting point for calculating state taxes. An estimated 300,000 Minnesotans will pay higher state taxes due to the loss of personal and dependent exemptions on their federal tax returns. Minnesota lawmakers and Gov. Mark Dayton were unable to agree on a fix during the 2018 legislative session, which ended in May. For that reason, Minnesota moves to the top of our least-friendly list.”
If the Legislature wants to help Minnesota taxpayers keep more of their hard-earned money, they need to act fast on a tax fix. We urge legislators and Gov.-elect Walz to make that fix a priority when the session starts in January, then worry about what they will do with the anticipated surplus.