The Minnesota Senate heard a bill on Thursday that would create a fifth income tax bracket for households that earn $500,000 or more annually.
“We should be asking those who have accumulated so much wealth to contribute a little bit more,” Sen. Jennifer McEwen, DFL-Duluth, said as she presented her bill, SF2290, which would establish a new income tax tier of 12.45 percent for income over $500,000 for married joint filers, $250,000 for single filers, and $400,000 for head of household filers. The legislation also proposes to increase the corporate franchise tax rate from 9.8 percent to 12.45 percent.
The goal of her proposal, McEwen told her colleagues in the Senate Taxes Committee, is to help pay for a looming $6 billion deficit the state faces in the next biennium.
“Creating this fifth tier, the very wealthiest Minnesotans would have to pay just 26 extra dollars for every thousand over a quarter million for an individual or half a million for a joint filer,” McEwen said.
The Senate hearing on the bill comes on the heels of a 2023 legislative session where DFL majorities in the House and Senate spent down a record $17.5 billion surplus and raised taxes by almost $10 million to cover a $20 billion increase to the state budget.
While a number of unions, including Education Minnesota, testified in support of the bill, the Minnesota Chamber of Commerce voiced strong opposition to all of its provisions, saying it would harm small businesses and the overall economic climate in the state.
“The vast majority of businesses in this state pay taxes through the individual income tax,” said Brian Cook, director of tax policy at the Minnesota Chamber of Commerce, which represents more than 6,300 business across the state. “A significant number of these businesses would face substantial tax increases under this bill. And for those that don’t and file through the corporate tax, they, too, would be subject to substantial tax increases under this bill.”
He noted that Minnesota already has one of the highest corporate tax rates.
Swing district DFL senators were silent on bill during hearing
McEwen’s bill is co-sponsored by Sens. Lindsay Port of Burnsville, Scott Dibble and Zaynab Mohamed of Minneapolis and John Marty of Roseville. A companion bill in the House lists 18 authors, all Democrats, including the following from suburban districts: Amanda Hemmingsen-Jaeger of Woodbury, Carlie Kotyza-Witthuhn of Eden Prairie, Jessica Hanson of Burnsville, and Erin Koegel of Spring Lake Park.
While McEwen said just “2.7 percent of filers” would “bare the burden” of the new tax bracket and corporate tax increase, none of her DFL Senate Taxes Committee colleagues spoke up to express support for the proposal.
Republicans during the hearing did voice their opposition to the bill.
“This [bill] will just chase productive people out of this state and make our budgetary situation even worse than it is,” said Sen. Steve Drazkowski, R-Mazeppa.
Sen. Carla Nelson, R-Rochester, said she shares McEwen’s concerns about the need to solve a $6 billion budget deficit, “but I do want to note it didn’t have to be this way,” citing McEwen’s support two years ago for spending down the historic surplus, which Gov. Tim Walz signed into law.
“The top five percent (of income earners), they pay 52 percent of the income taxes” in Minnesota,” Nelson added. “If this bill were to pass, we are going to see more and more Minnesotans move out of this state. And they will take their wealth and their tax generation with them, and then the corporate tax makes it less and less likely our businesses will expand and new ones will come there.”
In order for the bill to pass the Senate, all 34 Democrats would have to support it. Notable DFL senators who were in the hearing on Thursday and did not speak up on the bill include: Grant Hauschild of Hermantown and Aric Putnam of St. Cloud. Both are considered swing-district targets in 2026. In the House, Republicans and Democrats are tied at 67 members a piece. A bill can only pass that chamber with 68 votes.
Hank Long
Hank Long is a journalism and communications professional whose writing career includes coverage of the Minnesota legislature, city and county governments and the commercial real estate industry. Hank received his undergraduate degree at the University of Minnesota, where he studied journalism, and his law degree at the University of St. Thomas. The Minnesota native lives in the Twin Cities with his wife and four children. His dream is to be around when the Vikings win the Super Bowl.
