Like most Minnesotans, we cherish a special snowbird (in our case, Nana) who visits us each summer. She retired to Florida to take advantage of the sunny days — and declared herself a Florida resident — not just to avoid our income tax but because she is there a good chunk of the year. That is where she votes, pays taxes and volunteers. But since it is “hotter than tea biscuits” after May 1st and her grandchildren are here, we get her for part of the summer. So many of us spend summers with grandparents, often at family cabins; it is part of our heritage and the fabric of family life.
Gov. Mark Dayton is proposing that certain snowbirds become “part-year residents,” subjecting them to new taxes estimated to raise about $30 million over the biennium ($15 million a year). That is real money, but in the great scheme of things I have to wonder why the governor would want to get in grandma’s and grandpa’s grill for $15 million a year.
I am still digging into the details, but so far my research finds that snowbirds will pay income tax if they are here between 61 and 182 days and maintain an “abode” for at least 6 months.
An abode is currently defined under the 183-day residency rule as “a self-contained living unit, suitable for a year-round use, that is equipped with its own cooking and bathing facilities — in Minnesota.” It can be “rented or owned or occupied” (so I assume this means an apartment, condo, cabin, house, — heck why not an RV!).
Currently if you maintain a home here year round but only spend 182 days in the state, you can avoid residency taxes (all taxable income from all sources, including any earned while working in another state).
What about retirement income? According to the NCSL, states are largely free to tax retirement income, though most do not, with Minnesota being one of the exceptions. In Minnesota, retirement income is not exempt but “(T)axpayers aged 65 and over may be entitled to an exemption of up to $9,000 for single taxpayers and $18,000 married and filing jointly if both spouses are over 65. Income limits apply.” No wonder we get listed as “unfriendly” for retirement!
“Part-year residents will be subject to tax on their Minnesota-sourced income. … and a pro-rata share of all other income based on the number of days they are present in the state. A credit will be granted for income taxes paid on the same income to other states if the other state does not allow a credit for tax paid to Minnesota.”
If you are here for medical treatment (Mayo anyone?), the rules do not apply. Gee thanks.
This would capture folks who maintain a home for half the year and actually come to the state for at least 61 days. The reason?
“This proposal will make Minnesota’s overall tax system more fair by requiring those who benefit from Minnesota state and local public services for a substantial portion of the year also contribute to the cost of providing those services.”
Why would we make our retired parents keep track of their whereabouts when they are here to visit and enjoy their families during the summer? Why would we burden them with having to prove their whereabouts to the government in their golden years? The MMB website says they will have to keep records including, “planners, calendars, plane tickets, canceled checks, credit card and other receipts.” I know that folks trying to avoid the 183-day rule already do this, but this seems very invasive to me — and just stupid for a measly $15 million a year when we are spending about $30 billion in this state every year (state and federal funds).
Do we really want to chase retired people from our shores? Besides the loss to our economy, Dayton’s plan would deprive families of precious time with grandparents. How many retirees would sell or transfer their lake homes and cabins to adult children? Sell or drop the lease on condos and apartments? (I guess we can capture more taxes from the proposed 5.5 percent sales tax people would pay to consult with accountants, brokers and lawyers until they can get out of the state.)
All those special memories — and the neat things we treasure during our short, cherished summers — will be shortened to 60 days! Nana is no fool. She is mobile and so is her income.
The policy answers are for Minnesota to spend less and drop the income tax altogether. We should follow the lead of other states and go to a broad-based sales tax to avoid all this messy, personally invasive income-tax policy. We’d still have plenty of revenue to do the good things that make Minnesota such a great place to be any time of year.
Kim Crockett is chief operating officer, executive vice president and general counsel of the Center of the American Experiment. She is the executive director of Minnesota Free Market Institute at the center.
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