[image_credit]MinnPost photo by Peter Callaghan[/image_credit][image_caption]State Rep. Zack Stephenson introduced the bill to allow Minnesotans to subtract the supplemental unemployment payments from their income in taxes.[/image_caption]
While the state withheld taxes on regular unemployment benefits (which are taxed like regular income),it did not withhold taxes from the extra $600 weekly payments from the CARES Act and the $300 weekly supplemental unemployment payments created by the action of President Donald Trump whether withholdings were requested or not. As MinnPost reported Wednesday, the Minnesota Department of Employment and Economic Development, which administers Minnesota’s unemployment system, says it did not have the infrastructure in place to handle withholdings on the extra payments and said it chose to pay workers quickly rather than take the time to develop such a system.
DEED notified unemployment recipients that the payments wouldn’t have taxes withheld, but some people were still caught unaware when they did their taxes, or assumed the payments would not be taxed as income since stimulus payments weren’t.
A bill introduced Thursday in the Minnesota House of Representatives could provide relief to Minnesotans facing surprise tax bills by forgiving state taxes on the pandemic-related extra unemployment payments.
Rep. Zack Stephenson (DFL-Coon Rapids) introduced the bill to allow Minnesotans to subtract the supplemental unemployment payments from their income in taxes after hearing from people and after MinnPost wrote about it.
“There’s been a lot of focus and discussion by my Republican colleagues on these PPP [paycheck protection program] loan issues, and how that is creating unexpected tax bills, but candidly I’m just as if not more concerned about working families seeing huge tax bills that they weren’t expecting,” he said.
(A bill was recently introduced to forgive state taxes on federal PPP loans, which some businesses were surprised to find that, though forgivable, were taxed as corporate income by the state.)
Stephenson acknowledged his bill would be unlikely to pass before May, after most Minnesotans have done their taxes. That means taxpayers may have to file an amendment to get their money back.
Other states have forgiven taxes on some or all unemployment benefits, according to Forbes.
On Friday, the state announced a forecast of a $1.6 billion budget surplus. Stephenson said while he was watching a presentation on the budget, he was struck that the effects of this recession, compared to the Great Recession, have disproportionately fallen on people working in lower-wage sectors, and that eliminating the tax on the supplemental unemployment payments would help these people directly. Stephenson said he didn’t yet know how much the proposal would cost.
“It’s really important to think about how we respond from a policy perspective to what’s going on, and I think it’ really drives home for me that the focus should be on helping those working people who got hit hard,” he said. “As we think about the budget this year, we really need to be prioritizing, with our limited resources, helping the people that were most hurt during the economic crisis caused by COVID.”
I’d like to see a straight up or down vote on this proposal, no strings attached.
The DFL should dare the GOP to vote it down.
I think there should be a clean vote on this tax relief as well. Last I checked the DFL control the House. Maybe they should bring it up for a vote?
Waiting…Let me know when it happens.
Minnesota should NOT tax Unemployment benefits. In 2009 during the Obama
Depression I was receiving Unemployment Benefits and testified before the Senate Tax Committee when Sen. Tom Bakk was Chairman that a State Income Tax on Unemployment Benefits was a regressive economic policy. Senator Bakk agreed, and immediately offered an amendment to the Tax Bill to eliminate the tax permanently on Unemployment Benefits, and it passed the committee Unanimously ! Unfortunately the Tax Bill was later vetoed by Governor Pawlenty.
In 2021 it is time for Bi-partisan Tax Reform that does not further burden with income taxes on Unemployment, the People that lost their jobs; and Business Owners that got Pay Check Protection Loans, and have suffered through or been forced to close due to this Covid Shutdown; with income taxes on a relief program payments.
The State shut down their businesses, one way or another, and now they want to benefit from their shutdown with taxes? The people have been battered and bruised in Minnesota by elected officials enough, don’t throw a tax burden on them also. I wonder if South Dakota is having this issue? Oh that’s right, they didn’t shut down their state.
South Dakota doesn’t collect state taxes … they also rank poorly in a number of areas as a result.
Regular UI benefits allow the recipient the option for a standard 10/5% federal/state deduction. If the extra benefits were always going to be treated like taxable income, recipients should have had the option to have them taxed.
It would be nice if the politician who brought forth this issue explained why the state benefit should be taxed and the Federal benefit untaxed. It does not make sense, it seems to me either both should be taxed or neither should be taxed. If it makes sense for the state to give somebody money, and then turn around and ask for some of it back, shouldn’t the same apply to the Federal benefit? No? Then don’t tax either. If people need monetary help, just give them the money, don’t ask for some of it back.
When filing for the state benefit individuals have the option to have taxes withheld, or not. Since the Federal benefit appeared rather suddenly, and was only funded for 6 months, there wasn’t time to change the software to give the option of withholding taxes on the Federal benefit. Never mind the time constraint, recall the DMV fiasco, the current software works, do you really want the state to modify it and risk it not working? Asking the state to build a bridge or fix a road is one thing, to have them implement online software or see that it’s citizens receive a vaccine has been proven to be asking too much.