A $3 billion tax cut package that includes one-time rebates, a credit for low-income families and higher taxes for some Minnesotans passed the House on Saturday and was slated for a final vote in the Senate before heading to the governor's desk for his signature.
Democrats praised the proposal as the largest package of tax cuts for Minnesotans in state history, focusing the most relief on low-income families and middle class Minnesotans.
"We were really focused on who it is that needs help the most in this moment," said House DFL Tax Chair Aisha Gomez. "We want Minnesota to be the best state in the country to raise kids and have a family."
The proposal, which the House passed 69-63, also raises roughly $1 billion in new taxes over the next two years, largely through conforming to a federal tax on foreign corporations and changing some itemized deductions for wealthier Minnesotans. Republicans, who have pushed for a larger package of tax cuts, criticized Democrats for proposing tax increases at a time when the state has a $17.5 billion budget surplus.
"This is the largest tax increase in state history amidst the largest budget surplus in state history. That doesn't make sense to me," said Rep. Peggy Bennet, R-Albert Lea. "This bill takes from one group and gives it to another group."
Under the deal, single Minnesotans who make up to $75,000 a year can get a one-time refundable tax credit of $260, and $520 for married joint filers who make up to $150,000 a year. Families with children can get $260 more per child, up to three children, for a maximum of $1,300.
The bill also exempts taxes on Social Security income for couples who make up to $100,000 annually and $78,000 for single filers.
A centerpiece of the proposal is a new child tax credit that will provide families a credit of $1,750 per dependent, which will start phasing out at $35,000 in annual income for couples.
Roughly 265,000 families in Minnesota are eligible for the credit, which the Columbia University Center on Poverty and Social Policy estimates will reduce childhood poverty in Minnesota by more than a third.
"This is nation leading," said Minnesota Revenue Commissioner Paul Marquart. "This is going to be transformational. This is going to create stability in families. This is going to lift up families out of poverty."
Republicans were also critical of a provision in the bill that will bar the "open all feature," bonus games and free plays on electronic pull-tab machines. Those games must be removed by July 2024, under the bill.
The state authorized the use of electronic pull tabs more than a decade ago to help pay for U.S. Bank Stadium. Since then, Democrats say the games have started to operate too much like slot machines, which the state's tribes are exclusively allowed to operate.
Charities and legions said the changes would cost millions in revenues and limit how much they can donate to veterans and other causes.
"We're not eliminating pull tabs. We're just making them really boring like they used to be," said Rep. Greg Davids, R-Preston. "The provisions in this conference report are so onerous, so unfair to the charities that we will have charities going under."
Gov. Tim Walz has said he will sign the bill.