Minnesota Legislature passes $3 billion tax bill as Monday adjournment deadline nears

Minnesota lawmakers sent a sweeping $3 billion tax bill to the governor's desk on Sunday and were racing to finish other priorities ahead of their Monday adjournment deadline.

The DFL-controlled Minnesota Senate voted along party lines Sunday to pass the tax bill that includes one-time rebates, a credit for low-income families and higher taxes for some Minnesotans.

"This is a really good bill," Sen. Heather Gustafson, DFL-Vadnais Heights, said. "It's going to help out seniors. It's going to help out charities. It's going to help out families and children."

A transportation funding bill that includes a gas tax increase is also headed to the governor after passing the House and Senate on Sunday.

Under the tax bill, single Minnesotans who make up to $75,000 a year can get a one-time refundable tax credit of $260, while married joint filers who earn up to $150,000 annually get $520. Families with children could get $260 per dependent, up to three children, for a maximum of $1,300.

The bill also exempts more Minnesotans from the state's tax on Social Security. Couples earning up to $100,000 annually in federal adjusted gross income will be fully exempt from the tax, as will single filers making up to $78,000.

The rebate checks are smaller than the $1,000 for individuals and $2,000 for married couples that Gov. Tim Walz initially proposed. The Social Security tax cut also falls short of the full elimination that some Democrats and Republicans had called for.

"You did not deliver on that promise," Sen. Bill Weber, R-Luverne, said of the Social Security income tax elimination. "You got rid of part of it, but certainly not all of it."

A new child tax credit of $1,750 per dependent is a centerpiece of the bill.

The credit, which will start phasing out at $35,000 in annual income for couples, is expected to reduce childhood poverty in Minnesota by more than a third, according to an estimate from the Columbia University Center on Poverty and Social Policy.

"Gov. Walz, after the last election, committed to reducing and eliminating childhood poverty in the state of Minnesota, and one of the most visionary and significant measures to address that and start down that road is contained in this tax bill," said Sen. Matt Klein, DFL-Mendota Heights.

The Democrats' bill also includes a slew of tax increases that will raise $1 billion in new revenue in the next two years and another $1.2 billion in the following two years. The bill conforms to a federal provision that taxes some profits from corporations with business overseas and changes itemized deductions for higher-income earners, among other things.

More tax increases were included in the transportation funding bill that passed the Legislature. Democrats' transportation bill would raise the gas tax by indexing it to inflation, increase the metro area sales tax to fund transit projects and create a 50-cent fee on deliveries over $100.

DFL legislators were seeking to fix the state's roads, bridges and public transit systems.

Senate Minority Leader Mark Johnson, R-East Grand Forks, blasted Democrats for raising taxes when the state has a $17.5 billion surplus.

"The tax increases, the costs that are going to impact your family, are going to negate any sort of credit that you are going to get," Johnson said. "Life is going to become more expensive for you going forward."

E-pulltab changes

Republicans also denounced new limits on how electronic pulltabs look and how they are played. The state's American Indian tribes have sought the changes for years, arguing that e-pulltabs have become so dynamic that they mimic slot machines in violation of the tribes' exclusive right to operate casinos.

Charitable organizations unsuccessfully fought the change, predicting it would slow down players and cut into revenue they donate throughout the state.

Under the bill, electronic pulltabs must require players to open each line individually, meaning the tabs can no longer have an "open-all" feature activated by a single touch.

Other new restrictions include a ban on spinning reels and "representations that mimic a video slot machine, including but not limited to free plays, bonus games, screens, or game features that are triggered after the initial symbols are revealed."

A coalition including Protect Our Charities Executive Director Keith Franke, Allied Charities Executive Director Rachel Jenner and American Legion Department of Minnesota legislative chair Kristy Janigo issued a statement saying the bill will "effectively end electronic charitable gaming in Minnesota" and devastate bars and restaurants.

More work remains

Heading into the final day of the legislative session, lawmakers still have much left to do.

Legislative leaders struck a deal Saturday to devote $2.6 billion in funding toward infrastructure — borrowing $1.5 billion and spending $1.1 billion. Neither the House nor the Senate has taken up those bills yet, leaving them to the final day.

They also agreed to send $300 million to distressed nursing homes, another measure that hadn't yet been voted on.

The Senate passed a bill Sunday evening that would give Uber and Lyft drivers pay raises and job protection, sending it to Walz's desk. The House passed the bill Thursday night.

Those ride-share companies had pushed back against the bill, saying it would lead to fee hikes and services reductions. Uber threatened to leave parts of the state over it.

During a news conference Sunday, Walz would not say whether he would sign the Uber/Lyft bill.

"We're responsible for the implementation, so we have questions on a lot of areas that need to be answered before things come to us," Walz said, as drivers rallied and chanted outside the governor's reception room at the Capitol.

The governor said he was confident the Legislature would finish its work by the deadline of 11:59 p.m. Monday. He called this year's session "the most successful legislative session, certainly in many of our lifetimes."

"We're going to get this all done," Walz said.