Chair lays over bill to phase out Minnesota estate tax after hours of testimony

House File 170, a proposal to phase out Minnesota's estate tax, was laid over by the House Taxes Committee on Oct. 12 after extended discussion and several witnesses.

Chair Davids, who introduced the measure, described the proposal as a phased reduction of estate tax rates to zero over roughly 7–10 years. He emphasized concerns about heirs being taxed after an individual's lifetime of taxed earnings and said the bill’s cost was estimated in committee documents at roughly $200 million in the outyears. House Research staff clarified details of current exemptions: the record cited a $3 million general exclusion and an additional $2 million qualified farm and small-business subtraction, creating a $5 million effective protection in those cases.

Hunter Peterson, public policy specialist with the Minnesota Farm Bureau Federation, testified in support and said farm assets are often illiquid: “A limitation on the estate tax exemption means that each year fewer and fewer farm families will be protected from the estate tax and this is a clear risk to the continuity of family farms,” Peterson said. Peterson provided a numerical example showing farmland values can push family estates above the exemption and create liquidity pressure at death.

Committee staff reported estate-tax receipts of about $280.2 million in fiscal 2026 and a forecast of about $310 million in a later fiscal year, and noted estate taxes are deposited to the general fund. Members debated distributional and policy trade-offs: Representative Smith argued the estate tax is the most progressive tax in the state code and that eliminating it would benefit very wealthy heirs; other members said the bill seeks to protect family farms from forced sales. Representative Harder, speaking from personal experience as a farmer, said the proposal addresses real pressures on family operations: “I work hard for what I have… I am just not gonna sit in any committee anymore and listen to the attack on farmers,” Harder said, urging sensitivity to farm liquidity constraints.

The committee laid House File 170 over for possible inclusion in the omnibus tax bill. Members requested additional revenue and incidence analysis, and nonpartisan staff said they would follow up with percentages and counts of estates currently subject to the tax.

Why it matters: The estate tax affects the transfer of wealth at death and has been defended as one of the state’s most progressive levies while opponents contend it can force illiquid family businesses or farms to sell assets to pay tax bills. Phasing out the tax would have multiyear fiscal impacts on the general fund and ongoing implications for wealth transfer policy.

Next steps: H.F. 170 is laid over for potential inclusion in the omnibus tax bill; the committee asked staff for more detailed incidence data and fiscal modeling before further action.