Proposal to add a 5th tax bracket to boost LGA and CPA draws mixed testimony, laid over

Representative Hollins presented House File 4845, which would update income-tax brackets to reflect inflation (baseline year 2026), add a fifth top-tier bracket for the highest earners (sponsor described a 10.5% top rate for joint filers above $1 million), and increase Local Government Aid (LGA) and County Program Aid (CPA) effective in 2026. The sponsor said the changes would better reflect inflation and boost local resources for growing costs in police, fire, infrastructure and social services.

Mayor Kelly Her of Saint Paul testified in support, describing rising city costs and arguing the city receives far less in LGA relative to assessed needs; the mayor cited a projected $7 million rise in police and fire costs as an example. Labor unions and grassroots coalitions also testified in favor, framing the bill as restoring parts of the ‘‘Minnesota Miracle’’ by redirecting higher-earner revenue to local services. A union representative said counties and cities will need more resources because federal changes and inflation have increased local obligations.

Business groups including the Minnesota Business Partnership and the Minnesota Chamber of Commerce opposed the bill. They argued a higher top marginal rate would harm Minnesota’s competitiveness for employers and talent, could affect pass‑through businesses taxed at individual rates, and risked long-term economic consequences.

Committee members debated the policy at length. Supporters said the plan targets high earners and benefits communities across the state; opponents said the distribution of LGA/CPA increases would concentrate in a few cities and raised competitiveness concerns. Several members urged examining unfunded mandates and other ways to address local cost pressures.

The committee laid House File 4845 over for possible inclusion in the 2026 tax omnibus.