The Tax Cuts and Jobs Act of 2017, the final federal tax reform bill that quickly passed out of Congress late last year, brings profound, complex, and significant changes. Not since the 1980s has such a substantial change to the federal tax code – with minimal public debate and scrutiny – passed out of Congress. The implications for families and the broader economy are still being assessed. Here in Minnesota, we must do a similar comprehensive reworking of state tax laws to allow them to sync up with the federal code – a process known as conformity.
With debate continuing in the Minnesota Legislature, a lot is at stake for Prepare + Prosper’s customers, as well as our staff and volunteers. When and how the matter of conformity is decided will shape the new practices for the 2019 tax season and impact the tax refund of many.
Still, no one is exactly sure how long it will take to design new tax rules and regulations, forms and best practices. A great deal hinges on these final days of the legislative session. Once a deal is struck, the Minnesota Department of Revenue, along with the Internal Revenue Service (IRS) who’s already started the process, must then hasten to implement the changes and get ready for the 2019 tax season.
Prepare + Prosper opposed provisions in the federal tax reform bill in 2017, with concerns about the fairness of proposed tax cuts for corporations and wealthy individuals with little to compare for filers of modest means. At the time, Executive Director Tracy Fischman said the bill took the wrong path—one that presents both a short- and long-term danger to low- and moderate-income Americans. P+P remains concerned that those with low- to moderate- incomes will see little benefit from the tax changes, while over the long term, diminishing revenues would endanger important social programs.
Prepare + Prosper and several partner organizations are working to advocate for tax conformity at the state level that helps address the imbalance. For example, we supported the expansion of the Working Families Credit (WFC) proposed by Governor Dayton and the protection of Property Tax Refunds for homeowners and renters, which especially benefit seniors, people with disabilities, and families with children. Testifying in key committees, sending action alerts to customers and volunteers, and encouraging them to voice their support for fair tax conformity is the way we advocate for low- and moderate-income filers.
Nan Madden, director of the Minnesota Budget Project and a key ally, says we must ensure that everyday Minnesotans are not at risk during last-minute negotiations.
We must protect lower-income Minnesotans so that conforming to the federal tax law doesn’t increase their state taxes. We want to be sure that the Legislature makes these Minnesotans a priority by seriously considering the expansion of the Working Family Credit proposed by Governor Dayton. The federal tax bill provided the largest benefits to those already doing well in today’s economy. As decisions are made at the state level, we need to be sure that hardworking Minnesotans and their families are not left out.
Our on-the-ground experience of what the WFC can mean for our customers fuels our energy for the debate. We highlight the real life experience of customers in our social media campaigns and in discussions with legislators and the administration. Recently staff and longtime volunteer Mary Zweber testified on several bills and had a letter to the editor published in the Star Tribune.
Tax credits like the Minnesota WFC can boost a family’s income and make a big difference to hardworking families and our communities. I’ve worked with hundreds of taxpayers, and each has a unique story. Many use their refunds to meet basic needs and save for unexpected emergencies. One recent customer told me she’d use part of her refund to buy a high school yearbook for her daughter. I hear from others who will finally be able to afford car repairs so they can get to work or begin to pay down debt. I have real concerns about aspects of the new federal tax law that could harm Minnesotans. I hope our policymakers land on a final tax bill that helps as many of our state’s residents as possible.
Of course, once the state changes are passed, the process doesn’t end. Changes to tax codes need to be translated into regulations and materials for tax preparers. As Assistant Revenue Commissioner Cynthia Rowley told the Minnesota Legislature, “[Conformity] will impact virtually all Minnesotans in all parts of the state. It will impact all tax preparers and all vendors that provide tax preparation software.”
The work our Tax + Financial Services staff will need to do to prepare for the very challenging filing system for 2019 will be substantial. As a leader in the field, we are confident we have the experience to navigate the changing landscape, but it will be demanding. Between longtime staff and the professional acumen of many longtime volunteers and board members, we can draw on an immense body of knowledge.
