This bill amends Minnesota Statutes to establish a fifth tier of the individual income tax aimed at offsetting lost federal Medicaid funds. The new tax rates for married individuals filing jointly, unmarried individuals, and heads of household are adjusted, with significant increases in the income thresholds for each tier. Specifically, the first tier for married individuals is raised from $38,770 to $47,620, and the top tier now applies to incomes over $1,667,000. The bill also includes provisions for the commissioner of revenue to calculate the necessary tax rate for this fifth tier based on estimated revenue losses due to federal policy changes.

Additionally, the bill stipulates that the inflation adjustment for tax brackets will not apply to the new fifth tier. The commissioner of management and budget is tasked with estimating the total net change in federal Medicaid revenues for fiscal years 2026 and 2027, which will inform the tax rate for the fifth tier. The effective date for these changes is set for taxable years beginning after December 31, 2024, with further adjustments to the inflation brackets effective after December 31, 2025.

Statutes affected:
Introduction: 290.06