Late Wednesday night, the Tax Conference Committee put together the second major tax bill of the session, House File 3167.
Throughout this session, we’ve called on policymakers to make the tax system more fair. We applaud the conference committee for including a one-time 6 percent increase in the Property Tax Refund for Renters, or Renters’ Credit, in House File 3167. As a result of this provision, more than 346,000 Minnesota households will receive an average $36 more in their refunds this year. This represents a $12.5 million boost in the Renters’ Credit. The increase is automatic – taxpayers won’t need to submit anything in addition to the usual property tax refund forms or amend applications that have already been filed.
Some of the other major provisions in the bill include:
- A 3 percent increase in the Property Tax Refund for homeowners.
- Property tax reductions for farmers.
- Additional state aid to counties facing challenges with aquatic invasive species.
- Increases in Local Government Aid for cities.
- Adjustments to the sales tax exemption for local governments passed last year.
- June Accelerated Sales Tax changes so that fewer retailers are affected and the advanced payment is smaller.
House File 3167 includes $103 million in tax reductions for the FY 2014-15 budget cycle and just under $119 million in FY 2016-17. Combining the two tax bills, 44 percent of the projected balances in both this biennium and in FY 2016-17 go to tax reductions.
Policymakers were wise to keep the size of the second omnibus tax bill limited, given the substantial tax cuts already passed this session. We’ve emphasized the importance this session of making sure that tax and budget choices are sustainable, as Minnesota only recently turned the corner after more than a decade of frequent budget deficits. Minnesota’s recent history demonstrates that when we go too far in cutting taxes in the good times, we face larger deficits and make deeper cuts to critical services when the economy turns sour.
The state’s recent April Economic Update provided a good reminder that the forecasted surpluses are only projections, and noted that future economic growth may not be as robust as previously expected.
There may or may not be a few more adjustments to the omnibus tax bill. While the tax conference committee considers its work finished, there could be some other small adjustments before the conference report is formally signed next week.