Some Minnesota taxpayers who have to contend with limits on deductions for state and local taxes imposed by the new Tax plan may see their tax bills increase in 2018.
The new tax plan, which was pushed through by the Republican Party and approved along party lines set out by House Speaker, Paul Ryan, was sent to President Donald Trump’s desk for his signature which he promptly signed. Trump signed the bill quickly, according to CBS News, in order to avoid cutting Medicare by a year. That would have pushed it back to 2019.
However, many Minnesotan families, particularly those with higher incomes, are calculating the impact the bill will have on their wallets.
One provision of the bill limits SALT deductions to $10,000. The state of Minnesota has a four-bracket graduated income tax rate between 5.35 percent and 9.85 percent. Along with the removal of personal exemptions up to $4,100, many families worry that doubling the family deduction from $12,000 to $24,000 won’t be enough to bring taxes down.
Issued a statement
Former Minnesota Gov. Tim Pawlenty issued a statement through his organization, Financial Services Roundtable, praising the bill and claiming it would “help deliver the opportunity for individuals and American businesses of all sizes,” according to The Star Tribune.
However, economists, including many non-partisan agencies in the federal government, generally agree that the tax code reformation will primarily benefit large businesses, and will add more than $1 trillion to the debt over the next decade.
Standard Deduction
Brian Vnak, a Certified Financial Planner with Wealth Enhancement Group, told CBS many families were likely to switch to the Standard Deduction instead of the itemized deduction for kitchen remodeling. States like Minnesota with relatively high income and property taxes, Vnak said, would be more severely impacted by the tax bill that states with lower taxes due to the cap on SALT deductions.
“For high-income earners in this state, they’ve been getting that deduction, getting a benefit for it and they’re not going to have that anymore,” he said.
Despite concerns, however, Minnesotans may indeed see a decrease in their bills. Minnesota Power spokesperson Amy Rutledge said Wednesday in an email that the company could lower rates and pass savings along to customers due to the 15 percent cut to the corporate tax rate embedded in the tax bill, according to Duluth News Tribune.
