Minnesota's Bold Tax Reform Targets Childcare, Data, and Firearms
Minnesota Gov. Tim Walz is outlining his priorities for changes to Minnesota's tax law as lawmakers work to assemble a tax package in the closing weeks of session.
Minnesota Revenue Commissioner Paul Marquart presented the governor's proposals Thursday to the House Taxes Committee, emphasizing that the plan is designed to maintain a balanced state budget.
"The entire governor's budget is based on to have a responsible and balanced budget," Marquart said. "This leaves $3.7 billion on the bottom line in this biennium, and $1.8 billion to the good in '28-'29. And, if you include inflation, there's still about $800 million to the good. That's the key for the governor, is making sure we have a balanced budget."
The proposal, brought forward in legislation sponsored by state Rep. Aisha Gomez, DFL-Minneapolis and the committee's co-chair, was presented only for informational purposes. To move forward, it must first be considered by the House Rules and Legislative Administration Committee.
One of Walz's most-notable proposals includes an expansion of the state's child and dependent care credit. Under the plan, families with children under age 5 could receive up to $3,000 for one child or $6,000 for two or more, while families with older children could receive up to $1,500 for one child or $3,000 for two or more.
The Department of Revenue estimates the change would increase eligibility from about 44,300 families to more than 104,800, with an average credit of $1,818.
"This would be by far the largest in the nation," Marquart said of the increase in the child credit.
Another proposal would align Minnesota with several recent federal tax law changes.
While some provisions - such as modifications to business interest limits and expanded Section 179 expensing - are expected to reduce state revenue, others would increase it, including changes to employer-provided child care credits and a new 0.5% floor on charitable contribution deductions.
Additional proposals in the bill include: - expand the existing sustainable aviation fuel tax credit - decrease the state's general sales tax rate from 6.5% to 6.425% - expand the state's sales tax to include accounting services, banking and brokerage services, and legal services - establish a tax on the collection of consumer data by social media platform businesses; - create gross receipts taxes of 10% on the sales of handguns and 11% on the sales of long guns and ammunition
Different advocacy groups are expressing concern with some of these proposed measures - especially the social media tax.
"This is the wrong direction for the land of 10,000 lakes," said Blake Reed of Americans for Tax Reform. "Instead of layering on new taxes that discourage growth, policymakers should focus on keeping taxes low, reducing regulatory barriers, and allowing the private sector to create prosperity."
House Taxes Committee co-chair Greg Davids, R-Preston, said this hearing was just a first step in the negotiation process.
"We've got a lot of work to do the next few weeks," Davids said.
