House Taxes Committee moves Gov. Walz tax bill forward after amendment

Saint Paul — The Minnesota House Taxes Committee on 2025-03-25 advanced Governor Tim Walz’s tax bill, House File 2437, after adopting an amendment and moving the bill out of committee by voice vote.

The bill as presented combines multiple tax and revenue changes in the governor’s budget. Commissioner Paul Marquardt, commissioner of the Minnesota Department of Revenue, told the committee the proposal is “a responsible and practical tax bill” that aims to create a “fair and stable tax system” while supporting economic development.

Why it matters: The package would change how the state raises revenue and how certain programs are funded. Major provisions heard at the committee include an expansion of the state sales tax to selected professional and personal services, a 25% refundable provision for the research and development tax credit, reductions in Payments in Lieu of Taxes (PILT), changes to the Sustainable Forest Incentive Act (SFIA) payments, and administrative changes such as modifying the renter’s-credit certificate-of-rent-paid process.

Key provisions described to the committee

- Sales tax expansion and modest rate cut: The governor’s proposal lowers the statewide base sales tax rate by 0.075 percentage point while expanding the taxable base to include selected services such as accounting, legal services, banking fees, and certain professional services. Commissioner Marquardt said the proposal aims to “right-size” the sales tax to a more service-oriented economy and lower the base rate to make the tax “less regressive.” He presented department estimates showing a first full fiscal year (FY27) impact of a $99 million revenue reduction from the rate cut and a $215 million increase from the service expansion, producing a net revenue increase in the initial year tied to the expanded…