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 the first income bracket for married couples increasing from $38,770 to $47,620, and the top bracket for married couples starting at $1,667,000. The bill also introduces a mechanism for the commissioner of revenue to calculate the tax rate for this fifth tier based on estimated revenue losses due to federal policy changes, with the rate set to remain in effect for taxable years beginning after December 31, 2026.

Additionally, the bill includes provisions for annual inflation adjustments to the tax brackets, excluding the newly established fifth tier. The adjustments will reflect changes in the rate brackets, rounded to the nearest $10. 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 calculation of the fifth tier tax rate. The effective dates for these changes are set for taxable years beginning after December 31, 2024, and December 31, 2025, respectively.

Statutes affected:
Introduction: 290.06