HF2591

HF2591 (Legislative Session 94 (2025-2026))

Fifth tier of individual income tax at a rate sufficient to offset lost federal Medicaid funds established.

Related bill: SF2867

AI Generated Summary

Purpose of the Bill

The bill aims to address the financial shortfall caused by the loss of federal Medicaid funds by adjusting the state income tax structure. Specifically, it introduces a new tax tier to increase state revenue.

Main Provisions

Fifth Tax Tier: The bill establishes a new, higher tax rate on individual income for the wealthiest taxpayers in Minnesota.
Rate Adjustment: The new tax rate will be determined by the state’s Commissioner of Revenue. It will be calculated to generate sufficient revenue to offset the funds lost due to changes in federal Medicaid funding.
Implementation Timeline: This rate adjustment is set to begin in the taxable year starting January 1, 2025, and continue until December 31, 2026. The rate determined for this period will also apply after December 31, 2026.

Significant Changes to Existing Law

Tax Structure Alteration: For married individuals filing jointly, unmarried individuals, and heads of households, additional tax brackets are included beyond the current highest income categories.
Calculation of New Rates: The new rates will be determined based on estimated needs due to federal fund losses and will impact high-income earners with their taxable income exceeding certain thresholds.

Relevant Terms

income tax, tax rate, fifth tier, federal Medicaid funds, Minnesota state revenue, high-income earners, taxable net income, tax brackets, loss of federal funds.

Bill text versions

Introduction PDF file

Actions

Date	Chamber	Where	Type	Name	Committee Name
March 19, 2025	House	Floor	Action	Introduction and first reading, referred to	Taxes

Citations

[
  {
    "analysis": {
      "added": [
        "Establishing a fifth tier of income tax to offset lost federal Medicaid funds."
      ],
      "removed": [],
      "summary": "This bill adjusts the individual income tax rates under section 290.06, subdivision 2c.",
      "modified": [
        "Changes in the income brackets and tax rates applied to different levels of income."
      ]
    },
    "citation": "290.06",
    "subdivision": "subdivision 2c"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "The bill refers to section 289A.08, concerning taxpayers who are qualifying owners of entities.",
      "modified": [
        "Includes provisions for qualifying entities electing to pay tax."
      ]
    },
    "citation": "289A.08",
    "subdivision": "subdivision 7a"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References to adjustments needed for tax calculations involving Minnesota residents.",
      "modified": [
        "Adjustments included in calculating Minnesota adjusted gross income."
      ]
    },
    "citation": "290.0131",
    "subdivision": "subdivisions 2, 6, 8 to 10, 16, 17, 19, and 20"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Subtractions applicable in income tax calculations.",
      "modified": [
        "Subtractions from Minnesota adjusted gross income in tax computations."
      ]
    },
    "citation": "290.0132",
    "subdivision": "subdivisions 2, 9, 10, 14, 15, 17, 18, 27, 31, and 32"
  }
]