Minnesota lawmakers are considering two tax bills to raise revenue for the state. Key changes that would go into effect if the proposal, as written, becomes law include:
- Gas tax. The proposal would increase the gas tax by 70% over the next four years, resulting in an estimated 20 cent per gallon increase.
- Estate tax. State law currently sets the estate tax limit to increase to $3 million. This new proposal would remove the increase and freeze the threshold at $2.7 million.
- Capital gains tax. The proposal would also increase the capital gains tax rate by 3% and impose a new ceiling rate. If passed as proposed, the new ceiling rate would translate to a 12.85% tax for taxpayers who earn more than $500,000.
A recent analysis by Business North, a business publication that focuses on happenings in the Northern Minnesota and Wisconsin markets, notes the changes will have a negative impact on small business.
How will these changes effect businesses? One example: the proposal includes a provision that would align state tax law with the new federal tax law. This provision removes or reduces several deductions that are currently available for pass-through small businesses.
Another example: the changes will result in an increase to general property taxes.
Will the current Minnesota tax proposal become law? Lawmakers will likely continue to adjust the proposal. We will provide updates on the progress of the proposal as they become available.
If the proposal passes, business owners will be expected to comply with the new law. A failure to do so can result in an audit from the Minnesota Department of Revenue and potential penalties.