Without aligning the state tax law with the changes that came with the new federal Tax Cuts and Jobs Act, taxpayers could face nothing less “than a nightmare, an absolute nightmare,” said Jim Parmelo of the Minnesota Chamber of Commerce.

Parmelo was in town Monday to discuss legislative priorities for the Chamber; accompanying him was Sandy Forstner, executive director of the Austin Chamber of Commerce.

Parmelo said should the state only adopt the new law’s definitions without its lower brackets and rates, it is estimated it will expose more income to state taxes. Broadening the federal tax without including the lower rates and bracket changes would trigger as much as $1.6 billion paid by Minnesota taxpayers over the next four years.

“The federal changes did lower the rates for most Americans, but then exposed more income to state income tax because of the federal definitions,” Parmelo said.

The federal system has been simplified, but “Minnesota remains a highly deductible model,” Forstner said. “Without conformity, Minnesota taxpayers will pay $850 million more than they have to.”

Parmelo says the Minnesota Chamber believes another year of surplus should be devoted to tax relief by the legislature.

“We believe this is taxpayers’ money,” Forstner said.

Reducing the individual income and corporate tax rates will help a multitude of business owners, Parmelo said. At current rates, they present barriers to economic growth.

The vast majority – 92 percent – of business owners pay taxes through their individual income system.

Minnesota’s top individual income tax rate is 9.85 percent, the fourth highest in the nation.

“In fact … Minnesota’s lowest rate beats 23 other states’ top rates,” he said. “It shows you the competitiveness problem” in Minnesota.

The same holds true for the corporate tax rate, which is 9.8 percent, the third highest in the nation. That tax is regressive which is paid for by consumers in lower wages for employees, and lower returns for investors.

Other priorities for this legislative session include:

Taxes:

•Protect the research and development tax credit

•Protect against tax inflators

Workplace:

•Ensure consistent state laws by prohibiting local governments from enacting wage and benefit mandates.

Transportation

•Dedicate sales tax on rental cars and auto parts to transportation.

•Resolve funding challenges facing Twin Cities bus transit system.

•Establish permanent efficiency expectations at the Minnesota Department of Transportation.