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Republicans beat back DFL tax bill efforts

Sen. Scott Newman of Hutchinson warns fellow senators Tuesday that they should not remove business tax breaks from a bill they are debating. He said Hutchinson Technology leaders told him Minnesota taxes played a role in their decision to move many jobs elsewhere. Don Davis/Minnesota State Capitol Bureau

ST. PAUL -- Senate Democrats tried to turn a tax bill debate into a rich-vs.-poor debate, saying a Republican-written bill was crafted to help businesses and the rich.

Senate Republicans defeated all major changes to their tax bill Tuesday, passing the bill 37-26 after eight hours of debate over two days.

The bill would phase out a statewide business property tax, encourage local governments to work together, maintain local aid at 2010 levels and keep state income and sales taxes static. Democrats claim the measure would force local governments to raise property taxes $605 million.

The tax bill is a key to Republicans' planned $34 billion, two-year budget. Democratic Gov. Mark Dayton does not like the plan, and instead proposes raising income taxes on the richest 5 percent of Minnesotans.

Democratic attempts to mirror Dayton's income tax increase failed.

Sen. Gretchen Hoffman, R-Vergas, said the bill is good because it will help keep businesses in Minnesota.

Sen. Scott Newman, R-Hutchinson, agreed, saying that Hutchinson Technology is sending jobs overseas in large part because of Minnesota tax law that penalizes businesses. He said the company once employed 2,500 in his community, but just 500 remain.

Deputy Senate Majority Leader Geoff Michel, R-Edina, said the tax bill relieves tax pressure on businesses, pressure that built up under Democratic-Farmer-Laborite Senate control.

"After 38 years we need a new direction ... " Michel said. "The direction today is turning away from tax and spend and borrow. That kind of budget philosophy of the 1970s is not going to work any more."

Democrats hammered away with comments that the bill would force up property taxes.

"I am really concerned about the impact they will have on our Minnesota homeowners," Sen. Rod Skoe, DFL-Clearbrook, said.

Skoe failed in an attempt to lower homeowner property taxes 10 percent, at the expense of business and agriculture landowners.

Also failing were attempts by Sen. Tony Lourey, DFL-Kerrick, to allow Cloquet and Moose Lake to add local sales taxes.

Sen. Tom Saxhaug, DFL-Grand Rapids, said the bill's elimination of the Sustainable Forest Incentive Act would hurt the state's forests, which take up 30 percent of Minnesota land. The act gives landowners a reason to maintain forest land.

Sen. Keith Langseth, DFL-Glyndon, said the state gets additional revenues from a border cities provision that allows some western Minnesota communities to give tax breaks to save businesses, but the program is slated for elimination in the bill. He said he did not offer to amend the bill because "I knew what the result would be," but he said Dayton will not go along with ending the tax breaks.

Tax Chairwoman Julianne Ortman, R-Chanhassen, said that Moorhead and adjoining Dilworth should work together more to save money. Her bill contains $7 million to encourage such cooperation.

During the two-day debate on the bill, a provision was removed that would have allowed cities to raise sales tax to make up for lost state aid.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.