Minnesota’s Economic News — W/E 1/28/22
State and local taxes and spending Minn Post: A new Minnesota law is saving certain kinds of businesses a boatload in federal income taxes Star Tribune: Minnesota lawmakers face $7.7B…
Yesterday, I wrote about how Gov. Dayton’s petulant veto of the of the Minnesota Congress’ tax conformity bill would cost our state’s residents in terms of higher taxes and more work filing them.
But don’t take our word for it. The state’s Certified Public Accountant’s (CPAs) are also ringing the alarm bell. After my article setting out the harm this veto would do appeared in the Pioneer Press, one CPA emailed us to say “As a CPA – we know the cost (time and money) of our ill advised Governor’s veto”.
He’s not the only one. As MPR News reports
Ask a CPA about preparing Minnesota state tax returns next year and you’ll hear a common refrain.
“It’s going to be a mess and confusing,” said Chris Wittich, a CPA with Boyum Barenschee, a Minneapolis accounting firm. “The Department of Revenue certainly has a big job to try and explain to people how is this supposed to work.”
People who want to itemize deductions on their state tax returns have to keep all those records, of course. But a thumbs-down decision from the Revenue Department could render it a complete waste of time.
“That’s right,” laughed Josesph Maiers, a CPA in Sartell. He said people who itemize may encounter maddening inconsistencies between their federal and state returns.
“[For] federal taxable income, I can’t deduct entertainment expenses. My Minnesota [return], I can deduct entertainment expenses,” he said. “Moving expenses — if I’ve got somebody I moved into the area I can’t deduct it on the federal. I can deduct on the Minnesota [return].”
Tax accountants say what’s really vexing is the uncertainty about what rules will be in effect and which tax strategies to use. CPAs say some small businesses are confused about even what accounting methods they can use, as they try to figure out the best way to comply with federal and state tax codes that are out of sync.
White Bear Lake CPA Elizabeth Bystrom said some companies are considering what would have been unthinkable a year ago.
“Two sets of books,” she said. “I already have a hard enough time with some of my clients doing one set of books. Nobody wants to keep two sets of books.”
As always when compliance burdens increase, larger businesses with greater capacity to absorb them are less impacted.
The state’s biggest companies aren’t pleased either.
“Net-net over the long term it’s not a huge fiscal impact,” said Charlie Weaver, executive director of the Minnesota Business Partnership, which represents the state’s largest employers. “It’s just going to be more of a headache to deal with the fact that the filing process is going to be more burdensome now than it was before.”
By the time this mess starts to bite Gov. Dayton will have left office. But, as you’re struggling with your taxes next year, remember who to thank.
John Phelan is an economist at the Center of the American Experiment.