(KMSP) - House Republicans are unveiling their tax overhaul plan, which is the first major revamp of the tax code in three decades. Here’s how it will affect Minnesotans.
People will get to keep their 401k as President Donald Trump promised. But under the plan everyone loses the ability to deduct Minnesota state income taxes.
It's possible one of those areas Minnesotans could pick up that loss is in reducing the income tax brackets. There used to be seven, House Republicans are now proposing four as follows:
- a 12 percent tax bracket for those making between $24,000 and $89,000
- a 25 percent tax bracket on income above $90,000
- a 35 percent bracket for those earning above $260,000
- a 39 percent tax bracket for those making more than $1 million
It's the foundation for what is a mixed bag of a bill for Minnesotans, which reduces many deductions and increases others.
For example, the standard deduction for most tax filers nearly doubles. The new deduction is $12,000 for individuals and $24,000 for married couples.
The House authors also increase the child credit to $1,600. It’s currently $1,000. They also create a new family credit allowing a $300 deduction for each parent.
House Speaker Paul Ryan believes the new credits will save families money.
“With this plan the typical family of four will save $1,182 a year on their taxes,” said Ryan. “For many families having an addition $1,182 more will make a real difference.”
The tax plan saves the popular 401k retire plans. It also keeps deductions for charitable contributions. In a compromise, it keeps the interest deduction on mortgages, but caps the deduction at $500,000 loan. Property tax deductions are capped at $10,000.
The plan cuts the deduction for state and local income taxes. That’s a big deduction in high tax states such as Minnesota.
Minnesota Congressman Erik Paulsen had to answer to on FOX Business network.
“But you know what we have gone to the $10,000 property tax cap as well as keeping charitable deductions and a mortgage deduction and so we’ve tried to cover all of our bases here,” said Paulsen.
The plan has its critics.
Congressman Keith Ellison called it “a scheme to line the pockets of the wealthiest few by casting aside program vital to the rest of us."
Congresswoman Betty McCollum says for most Minnesota families this is a raw deal. In a statement she says "many Minnesotans will actually see their taxes increase because of the elimination of state and local tax deductions."
This is not the final bill. Lawmakers will start debating and possibly amending the bill on Monday.
The President says he'd like to have it pass next month.