Tax relief, proposed hikes at the fore as Minnesota legislators start to hammer out tax bill

Lawmakers will spend the next few weeks finishing tax bills, with conversations about exemptions for business owners and Minnesotans out of work as a top priority.

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The Minnesota Senate convenes at the state Capitol in St. Paul. (Forum News Service file photo)

ST. PAUL — The Minnesota Senate on Wednesday, April 28, on a 39-26 vote advanced a $681 million tax plan aimed at providing relief to businesses that drew down federal loans during the COVID-19 pandemic and providing assistance to some industries hardest hit.

A bipartisan group of lawmakers advanced the proposal to a conference committee where members of the Senate and House of Representatives will iron out differences in their respective tax proposals. There, some sort of compromise plan will hatch and help determine how much lawmakers can spend in the next two-year state budget.

Republicans who lead the Senate, along with Democrats who control the House, laid out distinct visions of what the latest round of state tax policy should include. And both caucuses agreed that its contents would be key to the state's economic recovery.

GOP lawmakers on Wednesday said the state needed to prioritize relief for businesses and some workers who were laid off due to the pandemic and the state's efforts to combat it. They outlined plans to let business owners erase state taxes on federal Paycheck Protection Program loans, grant temporary exemptions to help hospitality businesses make COVID-19 adjustments and provide tax credits to in-home child care providers.

RELATED: Read more Minnesota government news from FNS reporter Dana Ferguson


The bill would also allow some Minnesotans who collected unemployment to deduct part of that income from their state income taxes.

“The bill before us does provide tax relief but it does not increase taxes at this challenging time for Minnesotans, for our businesses that are recovering,” the bill's author Sen. Carla Nelson, R-Rochester, said. “And it does put us on the path toward empowering Minnesotans and encouraging economic growth.”

The disagreement over whether to increase taxes or add another tax bracket coming out of the pandemic has spurred division in the Statehouse with Democrats calling for more ongoing funding and Republicans firmly opposing any increases.

COVID-19 has disproportionately affected low-income communities and women in the workplace, state economists have said, while higher-income earners have continued to prosper. Coming out of the pandemic, Democratic-Farmer-Labor lawmakers have said tax relief should benefit businesses hit hardest and Minnesotans who lost their jobs. And they called for a new tax bracket for Minnesotans making $500,000 or more.

The additional ongoing funds could help pay for schools, child care, support for working families and affordable housing, they said.

“The effects of this pandemic have been shouldered disproportionately by lower-income Minnesotans. They lost the jobs, they lost their income, they struggled with rent and child care more than others," Senate Minority Leader Susan Kent, D-Woodbury, said. “We have an opportunity in this moment and we have an obligation in this moment to try to make people whole, to try to bring people back and to help us thrive moving forward."

Amendments aimed at creating the additional income tax bracket and boosting capital gains taxes to reduce taxes on social security income failed on the Senate floor Wednesday. And Republicans have said lawmakers should avoid any tax hikes as the state holds a $1.6 billion budget surplus and incoming federal support funding.

“We’re not raising taxes at the end of a pandemic on anyone," Senate Majority Leader Paul Gazelka, R-East Gull Lake, said.


Minnesota Chamber of Commerce President Doug Loon on Wednesday said the bill "provides great news to the state’s economic recovery."

Follow Dana Ferguson on Twitter @bydanaferguson , call 651-290-0707 or email

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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