A few months ago, aligning Minnesota's tax code to the changes in federal tax policy enacted in December seemed so daunting that a number of legislative observers predicted that either a special session or more effort early next year would be required to complete the job.
A late-session plea for fairness in Minnesota tax reform
Add an increase in the Working Family Credit to the final tax bill.
That pessimistic talk has died down, for good reason. Both the House and Senate tax bills, now in conference committee, bear enough structural similarity to Gov. Mark Dayton's proposal that deal making before this session ends on May 21 appears feasible. All three switch to federal adjusted gross income as a starting point for state tax calculations. All three maintain tax deductions already familiar to filers who itemize. All conform to federal rules on equipment depreciation, delivering a tax break much desired by small businesses and farmers.
That much accord is already a considerable lawmaking achievement. But the DFL governor and the Republican tax leaders can't take a bow yet. They still have compromising to do if they are to spare taxpayers and tax administrators from prolonged uncertainty, record-keeping inconvenience and, for some, an unintended tax increase.
On Sunday, we urged lawmakers to back away from promises of future tax cuts that may prove unaffordable but would be politically difficult to reverse. Today, we add one more plea: Strive to benefit all Minnesotans, including those whose incomes are so low that they pay no income tax. Add an increase in the state's Working Family Credit to the final tax bill.
Doing so would be a bid to win a signature from Dayton, who included a $52 million increase in the credit in his tax proposal. That's enough to deliver an average of an additional $160 per year to 329,000 Minnesotans. A deal might be struck at a lesser price.
But the reasons to boost the Working Family Credit go well beyond deal-making practicalities. That credit, established by the 1991 Legislature, has proved to be a potent policy tool, promoting employment and helping low-income families meet basic needs. It has enjoyed enough bipartisan support that when a divided government reduced income tax rates in 1999 and 2000, an increase was added in order to extend the tax cut's benefits to all Minnesotans, not just those with incomes high enough to pay income taxes.
That same argument applies this year. While the Senate bill attempts to reach low-income Minnesotans with a reduction in the tax rate assigned to the first tier (up to $25,890 in federal adjusted gross income for single filers), it still delivers no tax savings to roughly half of the Minnesota filers with adjusted gross incomes of less than $30,000. Notably, the same bill shrinks the number of filers expected to pay the state estate tax each year from about 350 to an estimated 100 — a $40-million-a-year tax savings.
To reach the lowest-income Minnesotans, a boost in the Working Family Credit is needed. As Nan Madden of the Minnesota Budget Project puts it, "In Minnesota, it shouldn't be good enough that we hold harmless the most struggling families and give a tax break to everyone else."
Perhaps, we should simply stop calling school shootings unspeakable because they keep happening. Our children deserve better.