Legislature inches toward tax cuts

By Don Davis

Forum News Service

ST. PAUL -- Minnesota lawmakers edged closer to passing millions of dollars in tax cuts today.

The Senate Taxes Committee passed a bill this morning chopping taxes $432 million, giving lawmakers a chance to pass the measure by day's end.

"There are a lot of positives here," Mike Hickey of the National Federation of Independent Business said before committee members approved the tax bill on a voice vote.

Senate Taxes Chairman Rod Skoe, D-Clearbrook, said that the bill balances the desire to trim taxes with the need to increase state budget reserves.

"The state is in the best financial state it has been in since 1999 and I do not want the state to return to the financial uncertainty of the 2000s," Skoe said.

Skoe also has been part of a Senate effort to increase state budget reserves $150 million to provide a cushion in case there are fiscal problems.

The House passed a $503 million tax cut on March 6 and Democratic Gov. Mark Dayton wanted them cut $616 million. Another tax bill is expected yet this legislative session, which must end May 19, and it could include deeper cuts.

Most cuts in the bill being considered today centered on two areas:

-- Rewriting some state tax laws to conform to federal law, which would lower many Minnesotans' income taxes.

-- Overturning business sales taxes last year's Legislature approved, including those placed on farm equipment and other commercial repair work, some on technology sales and a warehousing tax that was to take effect April 1.

Republicans generally supported the tax cuts, and wanted more, but were critical of what they called "mistakes" the Democratic-controlled Legislature passed last year when it tacked sales taxes onto many businesses.

"This is akin to robbing $100 from somebody on the street and giving them $2 back," Sen. Roger Chamberlain, R-Lino Lakes, said.

Today's work follows harsh comments Dayton made Tuesday, claiming Democratic Senate leaders were holding up a tax cut bill in hopes of getting House approval to construct a new Senate office building. Within 90 minutes of Dayton's comments, Senate Majority Leader Tom Bakk, D-Cook, and Skoe called in reporters and said they planned to vote on the tax bill today.

Time is important, Revenue Commissioner Myron Frans said, because 40 percent of Minnesotans probably will file income tax returns in April.

If the tax bill passes today, Frans says his staff will work through the weekend to update computer software and make other changes. He said private tax businesses and software companies also can make needed changes in time to help tax filers.

Senators expected to take up the bill this afternoon, and the House could return later in the day to consider it. If the House does not agree with the Senate bill, which is similar to the House bill, it would go to negotiations and delay implementation of the tax cuts.

Up to 500,000 Minnesotans could see lower taxes under the Senate bill. The bill includes more than $200 million in income tax breaks for individuals and another $200 million-plus in sales tax reductions for businesses.

The Senate tax bill is smaller than the House measure mainly because the upper chamber delays a business sales tax exemption on capital equipment purchases from taking effect until mid-2015, generating $64 million in additional tax revenue.

House and Senate bills would make more than 50,000 low-income families eligible for larger benefits under the Working Family Credit designed provide work incentives. More than 280,000 students would qualify for new student loan deductions.

The legislation would provide tax breaks for adoptive parents, homeowners facing foreclosure and teacher classroom expenses.

One of the major tax savings that could come from the state conforming to federal law is not included in the bills: the so-called marriage penalty.

State law forces married Minnesotans to pay more than if they were not married. While the House and Senate would change state law and lower taxes for income taxes due in 2015, taxes being paid now would not be affected. Republican efforts to make the change for current returns failed.

Another GOP attempt that failed would have reimbursed farmers who paid sales tax on farm equipment repairs since the tax began last year. Other business that paid new taxes also would not get refunds.

"While I am happy and pleased that we are addressing these oversights from last session ... in the meantime great harm has been done to many businesses," Chamberlain said.

St. Paul Pioneer Press reporter Bill Salisbury contributed to this story.