The Minnesota Department of Revenue has uncovered a drafting error in a sprawling $3 billion tax cut package passed last session that could cost taxpayers $352 million over the next two years if it's not corrected.
But state officials and legislators say they've agreed to a fix before any taxpayers are affected.
"Everyone wants to be transparent about this," Revenue Department Commissioner Paul Marquart said in a phone interview on Friday. "But at the same time, the key is: Taxpayers are not impacted now, and we have the commitment that they won't ever be."
The error, a few lines in a nearly 400-page bill, relates to standard deduction amounts. Lawmakers inadvertently used the 2019 standard deduction amount for tax year 2024, but that number didn't include four years of adjustments to account for inflation. The mistake meant most married taxpayers would lose roughly $3,200 on their standard deduction, while single filers would lose $1,600.
Without updates, the error would cost $110 for single filers and $210 for married couples on their 2024 taxes, Marquart said. Roughly 2.3 million returns would be affected. The error was first reported by MinnPost.
A staffer at the department, who was combing through the bill to prepare future tax forms, caught the error more than a month after the bill was signed into law. The change won't affect filers in tax year 2023, Marquart said, and the department and DFL tax chairs have agreed to pass a correction to the tax bill at the earliest opportunity. The next legislative session convenes in February.
Technical drafting errors are common at the State Capitol and occasionally come with a high price tag. In 2016, then DFL Gov. Mark Dayton didn't sign a tax cut package because of a minor wording error that would have cost the state $100 million over several years.
"Normally, on an error like this, it's usually pretty technical. But because of the amount of this one we thought, 'Let's get this out there and be transparent,'" said Marquart, who was a legislator and tax chair before joining Gov. Tim Walz's administration.
The broader package included more than $2 billion in tax cuts through direct rebates, Social Security income tax reductions and a new child tax credit. It also raised more than $1 billion in new taxes on higher earners and some corporations with a presence overseas.
State Rep. Greg Davids, R-Preston, who has served as the chair of the tax committee in the past, said mistakes can happen at the end of the session when staffers are working overtime to move everything through the process.
With smaller errors, he said tax committee chairs typically can send a letter to the department to explain the original intent, but something this large likely has to be handled legislatively.
"Mistakes are made, but this is a doozy," he said. "That being said, it's nothing we can't fix if we work together as soon as we get back and just correct it. I would hope no one would be opposed to correcting it."