Minnesota House, Senate reach deal on tax bill

Republican lawmakers reached a deal Friday on a plan they said would cut taxes for 2.2 million Minnesotans but are still facing a showdown with Gov. Mark Dayton as the legislative session winds down.

House Tax Chairman Greg Davids, R-Preston, called the new bill a "masterpiece" and said it includes a number of the provisions that Dayton supports.

The House and Senate spent the past few days ironing out gaps between their two tax bills, which come in response to the federal tax overhaul Congress and President Donald Trump passed in December.

House members' original plan reduced the tax rate for people making between $25,891 and $85,060. The Senate plan lowered the rate for those making less than $25,890. In the new version, people in both of the state's lowest income brackets would all see rate reductions.

Those rate cuts would cost the state about $137 million next year, more than $142 million in 2020 and nearly $199 million in 2021.

The bill would ensure 82 percent of Minnesota families would see a tax cut, and 99.8 percent of families would either get a tax cut or would not see a tax increase, said Senate Tax Committee Chairman Roger Chamberlain, R-Lino Lakes.

It provides modest relief that many people desperately need, he said.

Shortly after receiving a copy of the legislation, Department of Revenue Commissioner Cynthia Bauerly told members of the conference committee that merged the two proposals that she appreciates the two legislative bodies coming up with a unified position.

They need to look at how the plan fits with the variety of other spending proposals they are considering this legislative session, she said. Dayton, who is nearing the end of his term, has emphasized that he wants to leave the state on sound financial footing.

The new version of the tax bill appears to be an improvement over the original House and Senate bills, Bauerly said, but still does not include some of the governor's priorities. She noted that his push to expand the "working family tax credit" to allow more low-income families to access the benefit is not included.

If the state fails to pass a bill that aligns its tax code with the new federal code — a process called "conformity" — taxpayers would have to use the old federal rule, resulting in confusion for filers and state officials next year. Many Minnesotans would also see tax increases, because they would lose some of the federal deductions they previously relied on.

"This issue is too important to wait until next year — we are committed to working with the governor in the final days of session so Minnesotans can avoid hassles, headaches, and tax increases next year," Davids said in a statement.

Jessie Van Berkel • 651-925-5044