12,000 Minnesotans Ready to see State Income Increase

Published On: 20th September 2013

From the internet

For thousands of Minnesota residents, filing their 2013 Minnesota income tax returns is going to be a little more painful because of changes that have occurred in state income tax.

In addition to the state taxing tuition and adoption expenses that employers pay to employees, there are other taxes. Those whose tuition and adoption expenses are paid by their employers will pay $250 to $300 more in taxes.

However, there are 650,000 married couples who will be paying a “marriage penalty” that will add approximately $120 to the tax they owe.

Other taxpayers are going to lose tax breaks for child care, mortgage insurance premiums, student loan interest, and teacher classroom expenses. This is a part of the new state tax law that changed when the state did not conform to the federal tax code.

Overall, the complexities of filing taxes will increase as taxpayers are now going to have to add back certain federal deductions that were no longer on the state income tax return. This will also result in the cost of filing going up in many cases in addition to the higher tax bill.

The reason why the state did not conform to the tax deductions and credits passed by Congress is because doing so would have cost Minnesota around $300 million in tax revenue over a two year period. There was no other way in which the state could raise the revenue. There was one group not wanting to raise revenue, but there was another wishing to spend more.

There was legislation that was passed by the House Democratic-Farmer-Labor majority that would have conformed to the federal tax code. However, the revenue loss would have to be offset by changing the tax brackets.

A tax bracket adjustment would have raised taxes for 31 percent of taxpayers and 26 percent would receive cuts. In the end, the Senate or the administration would not support conforming to the federal tax code.

It has been recommended that that businesses keep two sets of books to keep track of the changes, especially those who are heavily impacted by the employer paid programs that will no longer be subject to tax breaks.

Some legislators are expected to push for conformity, but it is not expected to occur for a while. The last special session was called solely to provide storm damaged areas with the funding they needed to get back on their feet. Tax relief or any other issues were not agreed to be heard during that time. It very well may be an uphill battle, as 2014 is not a budget year and leaders from both parties say that repealing some of the business-to-businesses taxes will be their top priority when it comes to tax relief.

The prediction is that the state will continue to work toward being in conformity with the federal tax code so that Minnesota residents and businesses can have less difficulty filing their income tax returns in the future.