Mistakes happen. But when they occur in tax legislation, they can result in millions of dollars in unexpected taxes. That’s what happened in Minnesota – and it was worth $352 million.
Minnesota budget one
The $3 billion tax bill made headlines when it was passed earlier this year. The new law included provisions approving rebate checks for more than 2.5 million Minnesota taxpayers and a child tax credit targeted at low-income families. It would also align the state with the federal global low-income intangible tax (GILTI), eliminating state income tax on Social Security benefits for families making more than $100,000 overall (additional stages apply).
The bill, referred to as the One Minnesota Budget, was signed into law in May 2023 by Governor Tim Walz.
But in the middle of the bill were a few lines that accidentally cost taxpayers money — the tax bill returns to the standard deduction for 2019.
Here’s how it happened. The 2019 measure increased standard discounts and adjusted these numbers for inflation. But when tweaking the latest invoice– Set to take effect in tax year 2024 – No adjustments have been made for inflation to bring it up to 2024 levels. This means taxpayers stand to miss out on many years of inflation – These numbers were It was great over the past few years.
If the error is not corrected, the average married and joint taxpayer in the state will lose more than $1,000 in deductions and will pay another $210, while the average single taxpayer will pay an additional $110. The error will affect more than three-quarters of all taxpayers – about 2.3 million Minnesotans. A small percentage – 7% – of taxpayers will not be affected.
Fortunately, there is plenty of time to correct the error. Tax returns for the 2024 tax year won’t be filed until 2025, giving the state a year and some changes to fix the problem. Minnesota Chief Revenue Officer Paul Marquardt, whose staff discovered the bug, I promised to make a fix.
Marquardt also regretted the mistake, saying, “A lot of eyes looked at him, myself included, and he didn’t get caught.” Mistakes can happen with big bills, but he admitted, “This one sure is, wise, bigger than most.”