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Minnesota Senate DFLers back away from corporate tax hike

Twin Cities Pioneer Press logo Twin Cities Pioneer Press 5/7/2023 Christopher Magan, Pioneer Press
The Minnesota State Senate Chambers at the Minnesota State Capitol building in St. Paul Thursday, June 24, 2021. © John Autey/Pioneer Press/TNS The Minnesota State Senate Chambers at the Minnesota State Capitol building in St. Paul Thursday, June 24, 2021.

Senate Democrats unexpectedly pulled their support for a new tax that would raise more than $350 million in annual revenue from corporations’ overseas profits.

Business leaders and Republicans have criticized “combined worldwide reporting,” saying Minnesota would be the only state in the nation to implement it and it would drive businesses away.

The added corporate tax is one of several new taxes the Democratic-Farmer-Labor Party trifecta in control of state government proposed for the next two-year budget, despite the state having a $17.5 billion budget surplus. There also are proposals for increased sales taxes, a fifth income tax tier and a new payroll tax to fund universal family and medical leave.

“The worldwide reporting provision no longer has our support,” Sen. Ann Rest, DFL-New Hope, said near the end of a Saturday meeting of a bicameral conference committee working to settle differences between the House and Senate tax bills. Rest said there is still support for possibly a new capital gains tax or other “revenue raisers.”

The corporate tax provision was added to the Senate tax bill, which Rest is the primary author, in a committee hearing a few days before the legislation was debated by the full chamber. At the time, Rest said she had hoped no tax increases would be included in the Senate bill, but “I was wrong.”

House Minority Leader Rep. Lisa Demuth, R-Cold Spring, said in a statement it was “encouraging that Democrats are starting to wake up to how unrealistic and damaging their proposals would be for Minnesota’s economy.” But Republicans remain frustrated DFLers still want to raise other taxes.

“We don’t need to raise taxes. Minnesotans don’t support raising taxes with a record surplus,” Demuth said.

The worldwide corporate tax on overseas profits was included in both the House and Senate versions of the tax bill that passed each chamber along party lines. The House version also included a new 10.85 percent tax tier on household incomes of $1 million or more, but the Senate version did not.

Once differences in the bills are settled they will have to be reapproved before they head to Gov. Tim Walz for his signature. The governor has said he supports an increase in capital gains taxes.

The House and Senate tax legislation also has about $3 billion of other tax changes including a variety of rebates and credits.

There are rebates of about $275 per taxpayer plus money for up to three dependents that will cost more than $1 billion. There are also tax cuts on Social Security benefits so roughly 75 percent would pay no state taxes, raising the cap so individuals earning up to $78,000 and households with $100,000 or less in earnings would be exempt.

Democrats have included the tax changes in the two-year budget they need to finish before the Legislature adjourns May 22. The plan includes about $17.8 billion in new spending, about $10 billion of which is ongoing, with big increases for education, housing, transportation and other priorities.

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