More legislative changes are underway in Minnesota after Governor Mark Dayton signs another bill into law. The first this month was the history-making passing of same-sex marriage, which invariably requires a tax conversation over changes that might need to be made.
Another major change was recently added to the Minnesota tax world that has a more direct change. That was the agreement between legislators and Gov. Dayton that a 2 percent tax would be levied against residents who met a certain income level. This most recent change has economists discussing and debating the future of Minnesota's tax structure.
The 2 percent tax increase applies to married individuals who earn over $250,000 per year and individuals who earn $150,000 or more. This means that couples at the threshold would pay in approximatley $5,000 more per month. Lawmakers hoped that this new measure would help Minnesota close the gap on funding necessary for such things as increased educational expenses while only affecting a small percentage of residents.
Some economists have weighed in with their opinions about whether the plan is sustainable into the future. Like any other measure, some support the increase and some don't. There is even a small subset that supports it in the short-term but fears the effect it will have in the longrun.
Economist David Vang is one of this latter group. He said that relying on the tax increase for this small percentage leaves the state vulnerable. He warned that those under the new tax burden will not only look for new ways to shelter income but may even move out of state.
Maximizing tax benefits is certainly a goal for many, but the more creative the plan, the more susceptible the taxpayer becomes to a tax audit. For those facing an audit, it is important that they seek the assistance of a tax professional.
Source: My Fox Twin Cities, "MN TAX HIKE: What are the implications?" Jonathan Choe, May 19, 2013