The 2018 House Tax Bill


The Tax bill was debated on the floor of the house and passed 38-90. (See rollcall below, DFLers voting for it in yellow). The bill had bipartisan support. 

Roll call for passage, Tax Bill 2018

The DFL tried various amendments, including a few that played the class warfare card by cutting portions of the bill dealing with the Corporate Alternative Minimum Tax (AMT) which the House bill removed and in one case, giving the money back as property tax rebates.  




4/24/18 7:02 pm

In the afternoon markup session, the Tax committee amended HF 4843 with the DE Amendment which contained the new text of Chair David’s bill.  The property tax committee’s bill was also amended to the main Tax bill. 

Other attempted amendments and discussion:

Local Option Sales Tax increase for Duluth—Duluth voters approved this and Duluth streets are in bad shape but Property Tax Chair Steve Drazkowski pointed out that Duluth city taxes are already very high. He suggested that they trade pre-emption (no local minimum wage and benefit laws) for the tax increase. The author withdrew the amendment.


Removing the cap on the Minneapolis Lodging tax.  In 1986, a cap was put on how high the lodging tax could be.  Not a lot of discussion. Chair Drazkowski again expressed his displeasure at high taxes in certain cities but said that the committee could vote up or down. It failed on a 10-10 vote. 


A couple of amendments adding pieces of the Governor’s tax bill, like the working family tax credit expansion, affordable housing, increasing LGA in exchange for removing corporate tax cuts or replacing the Corporate AMT, which the bill removes. These failed.


The committee spent about 20 minutes discussing an amendment for a property tax abatement for a nonprofit mental health organization that bought property in Duluth a few days past the abatement deadline.  The property was worth about $17K. It was a good example of how the legislature has to act to resolve some tax questions for local governments.


In the summary portion of the hearing:


Chair Pat Garofalo: “96% of filers will see no change.”…”You’ve made some significant concessions up front.”


Davids was commended all around for getting a tax bill that was more likely to be signed by the Governor.


Minority Lead Paul Marquardt suggested that more individual income tax deductions would be the area were negotiations could happen.


4/24/18 2:29 pm

A first look--

The House Tax Committee did a walk through this morning and afternoon of their tax proposal after the Governor released his bill last week.  From here on out, the Tax committee will continue to work on the bill until it’s done, recessing instead of adjourning

The bill contains the House’s attempt to conform to the TCJA (The Tax Cuts and Jobs Act of 2018), and it does that – partially – and it puts a number deduction taken away by the Federal tax back in play.

Here is a summary where they agree with the Governor’s bill (so likely to be put into law).

• Converting the state to Adjusted Gross Income as the basis for the state tax rather Federal Taxable Income

The effect of this change is to make the determination of (1) itemized and standard deductions and (2) personal and dependent exemptions a matter to be determined by Minnesota, rather than federal, law. 

• Full conformity with ch. 179 business deductions. Businesses used to have to add those back in partially in the Minnesota State Tax.
• Extending the Angel Investment tax credit
• Some business changes like allowing small businesses to use cash rather than accrual systems of accounting.
• The senior property tax deferral. (The Governor has it in effect earlier in his bill.)
• Other narrower Technical and Policy changes from the agency.

Big areas in which they disagree:
• The House bill cuts rates for middle-income individuals; the governor has more deductions for individuals.
• The House treats “deemed repatriation” of foreign earned income for individuals and corporations differently. The Governor adds the income back; the House doesn’t. There was a lot of discussion of this provision in the walkthrough and the conclusion was, it’s unknown how this will impact the state’s bottom line since, at least on the corporate side, corporations can take the income under the tax relief provision over a period of eight years or all at once. Will the state see a one time bump in revenue or a trickle over eight years?
• The Governor wants to extend the provider tax which was supposed to sunset in 2019. A memo provided by his own Department of Revenue called retaining this tax “regressive,” which it is since it is passed on to rich and poor alike and it’s even known as the “sick tax” since that is who pays it. (Interestingly, the House bill extends the provider tax to massage therapists, who currently pay sales tax—this was pointed out as a “tax increase” by the commissioner of revenue in her testimony.)
• The Deputy Commissioner of Revenue read a long list of itemized deductions that the Governor’s bill would allow (which are currently deductible) which the House bill, by conforming more to the Federal Tax reform would no longer allow.


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