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Minnesota Center for Fiscal Excellence - Side-by-Side

Minnesota Center for Fiscal Excellence - Side-by-Side

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Published by FluenceMedia
An unofficial side by side comparison of the House and Senate tax bills.
An unofficial side by side comparison of the House and Senate tax bills.

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Published by: FluenceMedia on May 01, 2013
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 1 atwait@fiscalexcellence.org
No. 13-08 | House-Senate Side-by-Side
This publication is for MCFE members only. Please respect the privileges of MCFE membership by sharing this only withcolleagues in your company (for business members) and immediate family (for individual members).
If you needed any reminding about the difficulties of passing a tax bill with elements of reformor additional revenues, Monday’svotes on the Senate omnibus tax bill should have done it. The bill failed on its initial vote with seven DFLers – Sens. Bonoff, Clausen,Franzen, Hoffman, Jensen, Kent, and Scalze – voting “no” and one Republican – Sen. Senjem voting “yes”. These seven DFLersgenerally share some common traits – all in their first term(except Sen. Bonoff), representing suburban areas (except Sen. Jensen) whichcould be considered swing districts. After a brief recess, procedural motions and more debate, the bill finally passed on 35-31 vote withSens. Clausen and Hoffman changing their votes and Sen. Ann Rest voting this time around. The House vote was far more predictable, but still with four DFLers – Reps. Halverson, Radinovich, Rosenthal, and Selcer (again alargely suburban/first term/competitive district group) opposing final passage in the 69-64 vote. With both houses now having passedtheir omnibus tax bills the tax conference committee is imminent.Now onto the bills themselves. Our March-April edition of Fiscal Focus compares and contrasts the various tax proposals, so wewon’t spend too much time on that here. Suffice it to say that the items we think are most likely to find their way into the final packageare: increased income taxes in some form, additional aids to local governments, repeal of foreign operating corporations, and highertaxes on cigarettes. Whether the Houses temporary surcharge on high incomes, the House’s enhancement of the circuitbreaker program,or the Senates base-broadening rate-lowering work in the sales and corporate tax areas will make it into the final proposal remain to beseen; but these are far less likely to be acceptable to all the players involved. This issue of the Spotlight is an unofficial side-by-side summary comparison of the two bills, and is similar to the one that will beprepared by House and Senate non-partisan staff. Ours is designed, however, to more of an “at a glance” summary – if 26 pages canqualify as such. We quote at times extensively from the House and Senate non-partisan staff summaries of their respective omnibus taxbills, many times without quote marks. MCFE is responsible for all errors of interpretation in this summary; feel free to contact us withany concerns.Our next edition of the Spotlight will come out after legislators have adopted the final tax bill. Our members-only blog will provideupdates on the progress of the tax conference committee and additional information such as links to the text of the House and Senate bills,the official non-partisan side-by-side (for those of you who need even-greater detail), and fiscal comparisons of the two proposals.Please contact our office if you need help registering on the website.
 
 2 atwait@fiscalexcellence.org
No. 13-08 | House-Senate Side-by-Side
THE OMNIBUS TAX BILLS, 2013 (UNOFFICIAL)HOUSE FILE 0677 AND SENATE FILE 0552
House Article 1: One-Time Provisions
Sec House Tax Bill (HF 0677)
 
Comments SecSenate Tax Bill (SF 0552)Article 1: One-Time Provisions Article 7: Sales & Use Taxes; Local Sales Taxes1, 6,11Income surcharge.
Imposes a 4% surcharge ontaxable net income above $500,000 for married- joint, single, and head of household filers andabove $250,000 for all other filers for tax years2013 and 2014. Reduces the surcharge if the Nov.2013 or Feb. 2014 economic forecasts project anunrestricted general fund balance by such anamount that eliminates the projected balance.
 This would set the surchargereduction as the fifthpriority use for anyunrestricted general fundbalance, ahead of only therepayment to the stateairports fund.No comparable provision.2-3 School aids shift and property tax recognitionshift repayment.
Repays the school aids shift andrestores the school district current year aid paymentshift percentage from 60% to 90%. Eliminates theproperty tax recognition shift.
No comparable provision.4-5Section 179 expensing.
Conforms the individualand corporate franchise taxes to increased section179 expensing for tax year 2013 only.
No comparable provision.7-10 Sales tax; capital equipment exemption.
 Converts the exemption to an upfront exemption.
29Similar
, but for purchases made between 7/1/14and 6/30/15 the upfront exemption is only availableto businesses that: employed 80 or feweremployees during 2013 and; which were not 20%or more owned by a business which itself employed more than 80 employees during 2013.
12Appropriations.
Appropriates money as follows:
 
$262.2 million to restore the education aidpayment to a 90%/10% split
 
$569.9 million to eliminate the property taxrecognition shift
 
$21.7 million for additional education aidsrelated to the eliminating the property taxrecognition shift
No comparable provision.
House Article 2: Homestead Credit Refund and Renter Property Tax Refund
Sec House Tax Bill (HF 0677)
 
Comments SecSenate Tax Bill (SF 0552)Article 2: Homestead Credit Refund andRenter Property Tax RefundArticle 2: Property Tax1Income, definitions.
Changes the definition of income as used in the refund programs as follows:
 
Limits the addition for IRA contributions to theextent the sum of the amounts exceeds theretirement base amount for the claimant andspouse
 
Includes distributions received by the claimantor spouse from a traditional or Roth styleretirement account or plan, to the extent notincluded in federal adjusted gross income
 
Converts the reference for the federal tuitiondeduction add-back from Minnesota Statutes tothe Internal Revenue Code
No comparable provision.
 
 3 atwait@fiscalexcellence.org
No. 13-08 | House-Senate Side-by-Side
Sec House Tax Bill (HF 0677)
 
Comments SecSenate Tax Bill (SF 0552)Article 2: Homestead Credit Refund andRenter Property Tax RefundArticle 2: Property Tax2, 4Homestead credit refund.
Renames thehomestead PTR the “homestead credit refund”.Reduces the threshold percentage for filers with$19,500 to $105,300 in income in various amounts,with the maximum falling from 3.5% to 2.5%.Updates the maximum refund and householdincome amounts to what current law projects forrefunds based on payable 2014 taxes. Reduces thenumber of income ranges from 27 to 23. Sets thebase year for inflation adjustments to 2013.
An “apples-to-apples”comparison of the currentand proposed refundprograms is difficult becausethe number of income rangesfalls in the proposed refundprogram from 27 to 23.No comparable provision.3-4Renters property tax refund.
Reduces thethreshold percentage for filers with incomebetween $31,030 and $57,170 in various amounts,with the maximum falling from 3.5% to 2.0%.Increases the maximum refund for all incomeranges, increasing at the lowest income ranges from$1,620 to $2,000. Reduces the number of incomeranges from 29 to 22. Sets the base year forinflation adjustments to 2013.
An “apples-to-apples”comparison of the currentand proposed refundprograms in the House bill isdifficult because the numberof income ranges falls in theproposed refund programfrom 29to 22.3-4Renters property tax refund.
Generally reducesfilers’ copay share by five percentage points.Increases the maximum refund for all incomeranges, with the refund for the lowest incomeranges increasing from $1,620 to $1,790. Sets thebase year for inflation adjustments to 2013.
5Notification of potential eligibility.
Requires thatRevenue notify homeowners it determines may beeligible for a homestead credit refund based onavailable property tax and income informationabout their potential eligibility.
 No comparable provision.No comparable provision.
 
The proposal would haveaffected the subtraction forclaims against rent paid in2012 as follows:
# of Depend-entsSubtractionCurrentProposed
1 $5,320 $5,7002 $10,260 $11,0203 $14,820 $15,9604 $19,000 $20,5205 or more $22,800 $24,700
24Renters property tax refund; income.
Increasesthe income subtraction, the size of which iscontingent upon the number of dependents the filerclaims, by 10% of the base exemption amount(currently $3,800) for the filer’s first through fifthdependents.
 
House Article 3: Property Tax Aids and Credits
Sec House Tax Bill (HF 0677)
 
Comments Art:SecSenate Tax Bill (SF 0552)Article 3: Property Tax Aids and Credits Article 1: Aids and Credits (unless noted)Article 2: Property Tax1, 6 Surcharge on homeowners and auto policies.
Imposes an annual $5 surcharge on eachhomeowners and automobile insurance policyissued or renewed in Minnesota. Dedicates thehomeowners insurance surcharge revenue tosupplement firefighter-related pension financingand the auto insurance surcharge revenue tosupplement police-related pension financing. Terminates the surcharge when the PERA Policeand Fire and MSRS State Patrol Plans reach 90%funded on an actuarial basis.
1Local pension aids.
Appropriates $745,000 in FY2015 and thereafter for pension aids as follows:
 
$130,065 for PERA Police and Fire
 
$64,935 to municipalities whose firefightersare covered by PERA
 
$550,000 to municipalities with volunteerfirefighter retirement plansAppropriates $1.55 million in FY 2015 andthereafter for pension aids as follows:
 
1/3 as supplemental polic estate aids
 
2/3 to MSRS –State Patrol and PERA Policeand Fire Terminates the aids at the earlier of 12/31/2020 or

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