ST. PAUL, MINN. (WCCO) – The Minnesota House DFL budget includes a new income tax bracket for high state incomes and tax relief for small businesses that have obtained paycheck protection loans and Minnesotans who have received unemployment benefits.

the tax plan, released Monday, is part of their $ 52.5 billion spending proposal for the next two-year budget that the legislature will need to pass before the session rises.

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“Many of the rich and well-connected, and just lucky, are doing better than ever after this pandemic, and they can afford to be part of the long-term investment Minnesota needs,” said Ryan Winkler, House Majority Leader for the DFL. at a press conference on Monday.

The proposal creates a fifth level tax bracket at 11.15%, which would impact the following:

• $ 1,000,000 for married taxpayers who file joint returns and surviving spouses.
• $ 500,000 for single and married taxpayers who file separate returns.
• $ 750,000 for taxpayers who are heads of households.

If approved, the changes will apply to tax year 2021 and beyond. But Republicans who control the Senate say they refuse to approve any tax hikes, citing a projected budget surplus of $ 1.6 billion and federal stimulus money soon to the state.

The political divide between legislative leaders over the budget underscores the challenges that will likely lead to negotiations in the final weeks of the session.

“It’s the last thing we need right now,” Senate Majority Leader Paul Gazelka R-Nisswa said. “In Minnesota, we’re one of the highest-taxed states in the whole country, but Democrats in the House are saying, ‘we need more.’

the GOP Senate Budget Proposal would raise no taxes and spend $ 51.9 billion in the next biennium, slightly less than the budget of the DFL. Republicans are reportedly making 5% cuts in state government administrative costs, which House Speaker Melissa Hortman was quick to condemn on Monday, calling it a “no-starter.”

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“The Republicans in the Minnesota Senate have substantial cuts throughout state government at a time when we are unquestionably relying on our state employees more than ever,” said Hortman, DFL-Brooklyn Park. “Does the name of Kris Ehresmann mean anything to you?” Does the name of Jan Malcolm ring a bell? Now is not the time to downsize state government. “

Governor Tim Walz in his revised budget proposal abandoned several of its tax hike proposals, but the fifth level tax bracket remains.

Certain PPP loan relief and tax exemption for unemployment benefits

The house’s DFL tax bill matches Governor Walz’s plan that would represent $ 350,000 in federal paycheck protection program loans received in 2020 exempt from state taxes.

Walz’s office maintains that 90% of those loans in Minnesota were less than this amount.

The Senate approved a bill that would allow all of these PPP loans to be tax exempt. It also made it possible to subtract up to 18% of jobless benefits from tax payable for people earning up to $ 150,000.

This is different from the DFL house proposal, which allows up to $ 10,200 in unemployment to be subtracted from state taxes. Governor Tim Walz supports this approach.

Tax exemptions for PPP loans and unemployment insurance payments would impact the 2020 taxes, which have a extension of the filing deadline until May 17.

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Editor’s Note: An early version of this story had incorrect numbers for the fifth level tax bracket to reflect an earlier version of the proposal. The bill has since been updated, as has this story.