This bill proposes the establishment of a fifth tier in the individual income tax system in Minnesota, aimed at compensating for anticipated losses in federal Medicaid funding. The bill amends Minnesota Statutes 2024, section 290.06, by adjusting the income tax brackets for married individuals, unmarried individuals, and heads of household. Specifically, it raises the income thresholds for the existing tiers and introduces a new fifth tier that applies to incomes over $1,667,000 for married individuals and over $1,000,000 for unmarried individuals. The tax rate for this new tier will be determined by the commissioner of revenue based on estimates of revenue loss due to federal policy changes.

Additionally, the bill includes provisions for annual inflation adjustments to the tax brackets, excluding the new fifth tier, and mandates the commissioner of management and budget to estimate the total net change in federal Medicaid revenues by December 31, 2025. This estimate will inform the calculation of the tax rate for the fifth tier. The effective dates for these changes are set for taxable years beginning after December 31, 2024, and December 31, 2025, for the respective provisions.

Statutes affected:
Introduction: 290.06