HF2591

Purpose of the Bill

The bill aims to address potential revenue shortfalls caused by changes in federal Medicaid funding by introducing a new, higher income tax tier in Minnesota. This fifth tax tier would be applied to the highest income earners to offset the budget impact of losing federal support.

Main Provisions

• Fifth Tier Income Tax: The bill proposes the establishment of a fifth tier in the Minnesota individual income tax system. The rate for this tier is not explicitly listed but is to be set by the Minnesota commissioner of revenue.
• Income Brackets and Tax Rates: The bill outlines the tax rate schedules for different filing categories:
  • Married individuals filing jointly and surviving spouses will see their income taxed in increasing brackets, with the highest bracket over $1,667,000 being subjected to the new fifth tier rate.
  • Unmarried individuals and heads of households will have similar bracket structures, with the highest incomes taxed at the new fifth tier rate.
• Calculation for Part-Year Residents: Individuals who are not residents of Minnesota for the entire year will compute their Minnesota tax based on their income sourced within the state and other factors.

Significant Changes to Existing Law

• The bill modifies the existing Minnesota Statutes by amending section 290.06 to include the new tax bracket designed to raise additional state revenue.
• The tax rate for the fifth tier would be calculated to cover fiscal losses due to federal Medicaid policy changes that impact state funding.

Relevant Terms

• Income tax
• Fifth tier
• Tax bracket
• Medicaid funding
• Tax calculation
• Revenue offset
• Minnesota tax law