ST. PAUL-A Republican-led group of lawmakers unveiled a tax code overhaul late Friday that would cut Minnesota's first two tax brackets between now and 2020.
A joint committee of House and Senate lawmakers met this week to iron out the differences between tax plans that have cleared their two chambers. Minnesota needs to align its tax code with recent federal changes, or many residents will pay more next year.
The House and Senate deal lowers the state's first tax bracket from 5.35 percent to 5.25 percent. The change affects a single filer's earnings below $25,890 and a couple's below $37,850.
The second tax bracket rate drops from 7.05 percent to 6.85 percent. This decrease affects a single filer's income between $25,891 and $85,060 and a couple's between $37,851 and $150,380.
The rate reductions would take place over two fiscal years, so the lower rates would be in place by 2020. The changes would cost $137 million this year and $341 million by 2020.
"This proposal would be a victory for middle class families including what would be the first income tax rate cut in nearly two decades, and represents a serious effort on the part of the Legislature to reach agreement with the governor," said Rep. Greg Davids, R-Preston, who chairs the House tax committee.
Democratic-Farmer-Labor Gov. Mark Dayton has proposed tax credits for working families rather than rate cuts. His administration had not responded to the Republican proposal late Friday.
Republicans say their plan would shield nearly all Minnesotans from tax hikes and would lower taxes for 82 percent of filers.
"It will allow Minnesotans to keep more of their hard-earned money, and provide a good starting point toward larger reforms in the future," said Sen. Roger Chamberlain, R-Lino Lakes, who leads the Senate tax committee.
Republicans only released a basic framework of their proposal late Friday so many of the details remain unclear. More information is expected to be made public in the coming days.
The Legislature is facing a May 21 adjournment deadline.