The “Walz Checks” are on the table.
It’s a nickname given to the stimulus checks that Governor Tim Walz’s administration would like to send to 2.7 million Minnesota homes this year. Amounting to $175 for each single filer and $350 for married people filing jointly or as heads of households, they would significantly reduce the state’s projected budget surplus.
This proposal is part of what is known as the “Governor’s Tax Bill,” a set of state tax policy changes that include compliance with several federal changes, expanding the child and dependents and expanding the K-12 education credit.
The bill, HF3669, is sponsored by House Taxes Committee Chairman Rep. Paul Marquart (DFL-Dilworth). It was presented to this committee on Wednesday and tabled for possible inclusion in — or as potentially a large part of — an omnibus tax bill. He has no companion in the Senate.
“We probably have an $8.8 billion surplus when you count the $7.7 billion from the November forecast and the $1.15 billion from the [American Rescue Plan Act federal] fund,” Marquart said. “We have people who say, ‘Give it all back in tax cuts’ and people who say, ‘Give it all back in necessary investments.’ What I love about the governor’s budget is that it takes one approach at a time. It takes a balanced approach to both cutting taxes and investing in much needed areas around the state.
“For example, if you take the replenishment of the unemployment insurance trust fund, proposed by Governor Walz, and the billion dollars for front-line workers and the $700 million for reimbursement, that represents 4 .4 billion dollars, or half of the surplus, which returns directly to taxpayers’ wallets.
The first item on the bill’s agenda is to bring Minnesota’s tax code into line with federal changes made over the past three years. And there have been many since the start of the pandemic, including the Families First Coronavirus Response Act, the “CARES Act”, the American Rescue Plan Act and the Infrastructure Investment and Jobs Act. All have tax provisions that will be complicated or thwarted without the state making changes to its forms.
But much of Wednesday’s presentation by Revenue Commissioner Robert Doty and the department’s legislative director, Joanna Bayers, was devoted to tax credits.
Many households would be affected by what the Governor is proposing for the expansion of the Child Care and Dependent Care Credit. Among the provisions of the bill is a temporary increase in the maximum amount of the credit, which the Department of Revenue estimates would affect approximately 51,000 tax returns for the 2022 tax year, with an average reduction tax of $161.
And the income threshold for the credit would increase from $55,300 to $70,000. It is estimated that 20,900 additional households would thus become eligible for the credit, with an average tax reduction of $271. It would also now be accessible to taxpayers, regardless of their marital status, which would make approximately 2,600 additional taxpayers eligible.
An even bigger change would loom in the K-12 education credit, where the income threshold — currently $33,500 — would rise to $70,000 and be indexed for inflation. The measure of income would change from “household income” to adjusted federal gross income. An estimated 38,600 additional households would become eligible, with an average credit amount of $300.
Other changes would involve allocating an additional $7 million for fiscal year 2023 to the “Angel” tax credit for early investors in new businesses; holders of an individual tax identification number eligible for active family credit and household status; and the income threshold for senior property tax deferrals increasing from $60,000 to $75,000.
But individuals and businesses wouldn’t be the only ones affected by the bill’s changes to tax laws: local governments would potentially see more money in the coffers.
For example, $100 million per fiscal year in public safety assistance would be allocated to cities, counties, and tribal nations with police or sheriff departments. And there would be a new sales tax exemption for building materials purchased by contractors for facilities used by local government, school districts and nonprofits.
The bill would also establish an assistance program to cover the portion of state funding for soil and water conservation districts. And hemp would be included in the definition of an agricultural product.
So how would all of this affect the state’s bottom line?
For fiscal year 2023, this would represent approximately $1.08 billion in reduced revenue. The biggest prize would come from these stimulus checks, which would amount to approximately $703.7 million.
But that public safety aid would also account for a large chunk of that ($100 million), while exemptions for building materials for governments and nonprofits would cut revenue by $94.8 million. And complying with the tax provisions of the Consolidated Appropriations Act of 2021 would mean $55.7 million less in government revenue in fiscal year 2023.
Rep. Pat Garofalo (R-Farmington) asked if stimulus checks would be federally taxable. Doty didn’t believe him. Rep. Kristin Robbins (R-Maple Grove) asked if the K-12 education credit could be used for tuition. Doty said no. And Rep. Jerry Hertaus (R-Greenfield) suggested the sales tax exemption for building materials would be very difficult to enforce and could be abused.
Rep. Michael Howard (DFL-Richfield) asked about the highest household income at which one could receive one of the stimulus checks. The answer is $273,470 for married people filing jointly.
On Thursday, the committee is scheduled to receive public testimony on proposed tax policy changes.
Comments are closed.