Three of the biggest forces that will shape how much money Minnesota spends over the next couple years have now laid out their broad plans for taxes.
The House Republicans announced a large tax relief effort Monday, which comes days after Senate Republicans and Gov. Mark Dayton (a Democrat) put forward their visions.
Here’s a look at how each proposal compares.
House Republicans, led by Speaker Kurt Daudt of Crown, unveiled their budget targets Monday. Included is $1.35 billion in tax cuts for Minnesotans.
Daudt in his news release points to the state’s budget surplus – projected to be $1.65 billion over the next two years – as a reason to provide “long-overdue tax relief” to the people that “work so hard to generate” that tax revenue for the state.
Daudt, according to Session Daily, said those tax cuts will be focused on “middle-class families, students, elderly residents, agriculture and small businesses.”
Just like in the House, Republicans have a majority in Minnesota’s Senate. And last Friday, the Senate GOP put out a budget plan that includes $900 million in tax cuts.
Unlike the House GOP’s more targeted tax cuts (details of which are still to be announced), the Senate’s plan includes a permanent reduction in the income tax rate for middle class families. The announcement says it’d be the first such cut since 2000.
That big change would be targeted at families making less than $135,000 per year by making a permanent cut to the lowest income tax rate. The news release says it would benefit 81 percent of all taxpayers.
Here are Minnesota’s income tax rates. You pay a smaller percentage on income up to certain amounts, with money you make above those thresholds taxed at higher rates.
The Senate Republicans’ plan also includes a tax credit for college graduates paying off loans, a phase-out of Social Security taxes for seniors, plus relief for small businesses and farmers.
The governor’s plan includes tax cuts – but at a fraction of the size both the House and Senate Republicans are envisioning.
Dayton in January proposed $300 million in tax cuts, aimed at providing tax relief for working families, and to help lessen the cost of childcare in the state. It would also include property tax cuts for farmers, and bring the state’s tax code in line with the federal regulations – a potential boon for middle-class families.
In all, Dayton’s office said it would help 450,000 Minnesotans.
Dayton tweaked his overall proposal after last week’s budget surplus forecast, but didn’t really fiddle with the tax cuts portion.
Why this all matters
All of these tax cuts are part of broader plans to determine the state’s budget– something that’s done on a two-year cycle by lawmakers, every odd-numbered year.
So the budget the state is currently on was approved in 2015, and lasts through June 30, 2017. The budget lawmakers are grappling with now will kick in July 1, 2017, and be in effect for two years.
Total spending in the budget for fiscal year 2016-17 will come in at $41.816 billion, the state’s Management and Budget Office said. The three plans for 2018-19 detailed above come in around $45-$46 billion, give or take.
The three plans right now are just targets – so how much they’d like to spend on each of these areas. How much the state actually ends up spending depends on what House and Senate lawmakers agree on and pass, and Dayton agrees to sign.
And remember, everything is a give and take. So if taxes are cut by $500 million, the state’s going to get $500 million less in revenue – which means it can’t invest that money in other things, like education or the arts or roads.
But it means people might have more money in their pockets to spend at businesses or on their homes, or whatever else they want.
Lawmakers will now spend the next few weeks hammering out details and moving things forward. Expect more public negotiating and debate between Republican legislators and Dayton.