A view of the Minnesota State Capitol building in the city of St. Paul in the Minneapolis – St. Paul … [+]
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Mistakes happen. But when they happen in tax legislation, it can result in millions of dollars of unexpected taxes. That’s what happened in Minnesota—to the tune of $352 million.
One Minnesota Budget
The legislature’s $3 billion tax bill made headlines when it passed earlier this year. Included in the new law were provisions approving rebate checks for over 2.5 million Minnesota taxpayers and a child tax credit aimed at low-income families. It would also align the state with the federal Global Intangible Low Taxed Income (GILTI) tax, and eliminate state income tax on Social Security benefits for families generally making more than $100,000 (phase-ins apply).
The bill, referred to as the One Minnesota Budget, was signed into law in May of 2023 by Governor Tim Walz.
The Mistake
But tucked in the middle of the bill were a few lines that accidentally cost taxpayers money—the tax bill reverts to the 2019 standard deduction.
Here’s how that happened. A 2019 measure increased the standard deductions and adjusted those numbers for inflation. But when tweaking the most recent bill—scheduled to take effect for the 2024 tax year—no adjustments were made for inflation to boost them to the 2024 levels. That means taxpayers would miss out on several years worth of inflation—those numbers have been significant over the past few years.
If the mistake isn’t corrected, the average state married-filing-jointly taxpayer would lose out on over $1,000 in deductions and would pay $210 more, while the average single taxpayer would pay an extra $110. The mistake would affect over three-quarters of all taxpayers—about 2.3 million Minnesotans. A small percentage—7%—of taxpayers would not have been affected.
The Fix
Fortunately, there’s plenty of time to correct the mistake. Tax returns for the 2024 tax year won’t be filed until 2025, giving the state a year and some change to fix the problem. The head of the Minnesota Revenue Department, Paul Marquart, whose staff caught the error, promised to make a fix.
Marquart also expressed regret over the error, saying “A lot of eyes looked at it, including mine, and it just wasn’t caught.” Mistakes can happen with large bills, but, he admitted, “this one certainly, moneywise, is larger than most.”
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