Minnesota’s legislature will head into complicated waters as it figures out what the Tax Cuts and Jobs Act will mean to the state’s tax collections.
Without any changes to Minnesota’s current tax structure, tax collections are projected to increase by about $850 million in the 2018-19 budget cycle, according to the Minnesota Department of Revenue.
According to Minnesota House Taxes Committee Chair Rep. Greg Davids, the federal act removed and limited deductions and exemptions on personal income that raised revenue. This in turn, increased the state’s standard deduction, and increased other programs like the doubling of the per-child tax credit which reduced revenue.
The federal act’s complexities along with Minnesota’s current tax policy mean that Minnesotans will have a $1.5 billion tax increase in the next biennium–Minnesota reviews it’s budget every two years.
Davids believes that because of the federal act’s complexity, the state cannot wait until January 2019 to review. He has proposed a tax conformity bill for the 2018 legislative session.
“A lot of fundamental changes will happen naturally through conformity. My goal right now will be to look at who is affected by those changes,” Davids said to Pioneer Press in an editorial.
Non-conformity is not an option for Davids.
“While it would be a complete mess for the individuals, it would be a disaster for the business community, large and small, as they would have to maintain two separate tax structures,” he said in the editorial.