Gov. Tim Walz proposed a tax package this week intended to help alleviate a headache confronting Minnesota businesses and families struggling to file their taxes in the wake of President Donald Trump's federal tax cuts.
Republicans and their business allies, however, have quickly denounced the proposal, calling it yet another tax increase on businesses in a year when the DFL governor already has proposed to hike the gas tax, extend a tax on health care providers and raise the metro sales tax for transit.
On one point, both sides agree: They would like to give Minnesotans future relief from complications many are enduring this year as they file their taxes.
"Nightmare" is how Chris Wittich, a tax accountant at the firm Boyum Barenscheer, described it. "It's been a struggle for businesses and families," he said, adding that the problem stems from state and federal tax laws that are currently in an awkward marriage.
The state's tax system is chained to federal tax rules because Minnesota uses "federal taxable income" to help determine residents' tax bills. But the state's tax system isn't automatically updated every time the federal government changes its tax rules — most recently in 2017 when the GOP-controlled Congress passed a massive tax cut.
Absent any action by the Minnesota Legislature, analysts say the two tax systems resemble a blended family rife with dysfunction.
Walz's proposal would divorce state and federal tax policy by ending the reliance on federal taxable income to determine Minnesota taxes. Backers say it also would create predictability and consistency for businesses using tax provisions such as depreciating assets.
"There's a benefit to businesses from the simplicity," said Minnesota Revenue Commissioner Cynthia Bauerly.