St. Paul, Minnesota — Today Minnesota Management and Budget announced that the budget forecast shows a projected budget surplus of $1.23 billion for fiscal years 2014-15, a $408 million improvement over the last forecast. The forecast shows a surplus of $2.59 billion in the FY 15-16 biennium.
“Our economy has done well over the past year, especially considering where we started,” said state Representative John Persell (DFL – Bemidji). “Let’s not forget that when we came to the Capitol for our 2013 session we were facing a $600 million deficit and we owed $800 million to our schools. Now, our schools are fully paid back and we have a $1.23 billion budget surplus.”
Yesterday, the House Tax Committee voted to move forward with legislation (HF 1777) to cut taxes for middle class families and to repeal business-to-business taxes. The $514 million tax cut bill would reduce taxes largely by conforming to federal tax changes.
“Our economy has done well thanks to hardworking families and businesses across the state,” said Rep. Roger Erickson (DFL – Baudette). “This bill takes a good portion of that surplus and gives it back to those families and businesses that have kept our economy moving forward over the past year. Hopefully, these cuts can help them drive our economy forward in the future as well.”
Whenever Congress changes federal tax law, the Legislature must decide whether to conform to the changes at the state level or not. Last session the House included federal tax conformity for tax year 2013 and beyond. However, this did not end up in the final budget signed into law. The legislation passed by the House Tax Committee would provide $200 million in middle class tax cuts through permanent federal tax conformity. Those tax cuts include:
• $111 million for middle income married families (conforms to federal tax code to eliminate ‘Marriage Penalty’ )
• 650,000 families will see an average tax decrease of $120.
• $36 million for working families (Increase phase-out range for Working Family Credit to match Earned Income Tax Credit (EITC))
• More than 50,000 working families will see an average decrease of $300.
• $26.4 million for students, parents paying for college and students paying off loans (Education-related provisions including qualified tuition and related expenses)
• $3.9 million for new homeowners (mortgage insurance premiums deduction)
• 80,000 new homeowners will see an average tax cut of $60.
• $7.2 million for homeowners that refinanced or had a short sale
• $1.8 million for Minnesota families with dependents
• 25,000 families with household incomes below $38,570 will see a $65 tax decrease.
• $400,000 for adopting families (employer- provided adoption assistance exclusion)
• $1.1 million for 60,0000 teachers (Classroom expense deduction for educators)
• (Source: Non-partisan House Research)
The House Tax bill also would repeal three business-to-business taxes (warehousing and storage services, commercial equipment repair (including farm machinery) and telecommunications equipment) that were passed as part of the 2013 budget. Last year those taxes were part of a Senate package that paid for an upfront capital sales exemption for businesses and provided property tax relief by eliminating sales taxes for cities and counties.
The full House will likely vote on the tax relief bill next week.