Here's what you'd get from rebates, tax breaks at Minnesota Capitol

Gov. Tim Walz has proposed rebate checks. Senate Republicans are offering an income tax cut. House Democrats are seeking tax credits for parents.

Lawmakers have a $9.3 billion budget surplus to work with, though there's no requirement that they spend it because it's not a budget year. For anything to happen, the divided Legislature and Walz will have to agree by the May 23 end of session.

Here is what the competing proposals offer:

Broad tax cuts

Republicans who control the Senate have proposed cutting the state's bottom income tax rate -- which all filers pay on at least a portion of their income -- nearly in half, from 5.3 percent to 2.8 percent. A married couple making $100,000 would save about $1,000 a year under the Republican plan, or about $38 per biweekly paycheck.

There are no income limits. The GOP proposal would cost $3.3 billion next year and $5 billion in the two years after that.

Direct payments

Walz has proposed direct payments of $500 per adult, which he says revenue officials could send out by summer. The checks would be subject to income limits of $164,400 for single filers and $273,470 for married couples. It would cost $2 billion.

The House plan does not include either an across-the-board rebate or tax cut.

Parents with children

The House proposal becomes more lucrative for parents, who would get a $325 rebate per child under the age of 17 this year. The size of the payment phases out above $140,000 for married filers or $70,000 for singles.

Parents with children less than 5 years old would also qualify for an expanded dependent care tax credit, which would increase to $3,000 per year under the House plan. Currently, the maximum credit is $1,050.

The credit is equal to 50 percent of qualifying expenses up to $6,000. Child care is a qualifying expense, House Tax Committee Chairman Paul Marquart, DFL-Dilworth, told reporters.

The expanded credit would be effective from tax year 2022 until 2028, meaning parents would need to wait until next tax filing season to receive the benefit. The cost of the credit is $183 million a year, revenue officials estimate.

Student loan borrowers

The House nearly triples the size of Minnesota's student loan credit to $1,400 per borrower. The maximum credit is currently $500.

The change would be effective from tax year 2022 until 2028.


The House changes the renter's credit into a refundable income tax credit, allowing renters to get their refunds earlier in the year. 

About 120,000 eligible people currently don't apply for the current credit, Marquart said.

Older Minnesotans

The Senate proposal exempts all Social Security income from Minnesota taxes, regardless of how much other income a retiree has.

Under current law, 53 percent of Social Security recipients pay no state taxes on that income because of the existing federal deduction and Minnesota's subtraction, state Revenue Commissioner Robert Doty said.

The House raises the exemption to the first $75,000 in household income but does not lift it completely, Marquart said.