A $2 billion tax cut proposed by House Republicans Monday would give all income tax filers a small, temporary break while also extending savings to businesses, Social Security recipients, military retirees, farmers and students with college loans.
The temporary tax break would amount to $70 per single filer making $50,000 a year, more for those with dependents. The exemption would phase out after two years, but would cost $539 million in that time.
The next biggest tax break would go to a permanent phaseout of the statewide business property tax. With initial costs pegged at $453 million over two years, eliminating the levy would cost $1 billion by 2018-19 and nearly $1 billion per year when fully phased in.
Similarly, a tax exemption for Social Security income would cost the state treasury $237 million in the coming budget period, but would rise by 2018-19, to $641 million.
Rep. Greg Davids, R-Preston, chairman of the House Taxes Committee and chief author of the bill, said "the basic philosophy of this bill is Minnesotans know what to do with their money better than state government does."
If enacted, the Republican plan would result in widespread policy implications for years because it would lock in significant tax savings for businesses that own property. By reducing state revenue over the long term, it would force future Legislatures to cut government or find new revenue, especially if and when a recession hits and tax receipts slip.
On the spending side, Gov. Mark Dayton's $343 million universal prekindergarten plan would grow to $914 million in 2018-19, compelling future Legislatures to make potentially difficult fiscal choices.
The two approaches illustrate the parties' philosophical divide about how to continue Minnesota's economic prosperity: Republicans would put more money in the hands of the private sector, while Democrats would invest in early childhood learning to develop an educated workforce.