It was the largest proposed tax cut in Minnesota's history. And it didn't get done
State Sen. Carla Nelson calls end of session 'shameful.' But House Democrats say a 'deal is a deal.'
ROCHESTER — There may never be tax relief legislation like the one that never got done in the waning hours of the recently concluded legislative session, state Sen. Carla Nelson says.
As chairwoman of the Senate Tax Committee and a member of the conference committee that ironed out the final product, Nelson, of Rochester, is intimately familiar with the details of the bill and what it represented for families
For starters, there was the elimination of taxes seniors pay on their Social Security income; a tax reduction for every Minnesotan who pays income taxes; an estimated $660 million of property tax relief at a time of escalating property values; and tax credits averaging $800 for families with child and dependent care needs.
It represented the largest tax cut in the history of the state, legislative leaders say. It couldn’t have come at a more critical time, they say. And it didn’t get done.
Like the nation at large, Minnesotans are coping with record inflation and rising costs for everything from food to fuel, from diapers to baby formula. And the proposed tax relief would have provided a cushion against these escalating costs.
But then time ran out on the session.
The fact that the bill didn’t get to the legislative finish line, says Nelson, is “incredibly disappointing.”
“Everyone agrees. Anyone who is aware of this tax bill agrees that this is the most historic, most significant tax relief bill for Minnesotans,” Nelson said. “And it’s just shameful that this would be held up because of other bills that were not agreed upon.”
Nelson said she is not blaming anyone, just that the outcome was “shameful.”
Yet, Nelson argues that the $4 billion tax relief bill was held “hostage” to three spending bills on education, public safety and health care that House Democrats and Senate Republicans could not come to agreement on in the final hours of the session. Democrats control the House, and Republicans control the Senate, so passage of key legislation requires buy-in from both parties
When the session began in St. Paul in late January, legislators were looking at divvying up a projected $9.3 billion surplus. Tax relief was a top item on the agenda.
Rep. Paul Marquart, Democratic chair of the House Tax Committee, and Nelson announced their agreement on the tax legislation in the final week of the session.
It was made possible after DFL Gov. Tim Walz and leaders of the DFL House and Republican Senate reached a global agreement on how the surplus would be used. There would be $4 billion in tax relief, $4 billion in spending and $4 billion on the bottom line, meaning that it would be used as a reserve in the event of an economic downturn.
Democratic leaders dispute the idea that they used the tax relief legislation as leverage to advance their spending plans. Marquart notes that when a deal on the $4 billion tax bill was reached, it represented “one part of the agreement.”
“For me, an agreement made is an agreement kept,” Marquart said. “As I said at the press conference when we came to our agreement (on the tax legislation), I said this is one part of the agreement. And until all the parts are approved, nothing moves forward.”
Marquart said it was well known that Republicans wanted a tax relief bill this session. Ending the practice of taxing seniors' Social Security benefits in Minnesota has been a long-sought goal of theirs. Both sides compromised to reach a “strong bipartisan tax bill.”
“Everyone has to come to the bargaining table and fulfill the other part of the agreement. There is no using leverage here,” Marquart said. “All we have as legislators is our word. And the agreement was very clear.”
Marquart said it would be a mistake to wait until next year to reach agreement, because no one knows what the economic climate will be like then. Some economists are predicting a recession. If the economy goes sour and tax receipts dry up, much of the surplus that under-girds the tax relief could evaporate.
That’s why some leaders say that a special session is needed. While Walz and Democratic leaders support the idea of a special session, GOP Senate Majority Leader Jeremy Miller continues to throw cold water on the idea.
"Where I come from, deadlines mean something and when you set a deadline, you have to meet it. We made countless good faith efforts by putting forward public offers that would have earned bipartisan public support,” Miller said in a statement to the PB.
“Time and time again, the agreement was compromised by Democrats’ refusal to take the deadline seriously or provide offers within the agreed-to framework. The governor even called off one agreement between House and Senate chairs in the minutes before it was coming up for a vote.
"Last session, the Legislature passed a $52 billion, two-year bipartisan budget, and less than a year later the state has a massive budget surplus as a result of overcollection from the taxpayers. I’m always willing to listen to a special session proposal, but it’s important we spend some time outside the isolated bubble of the Capitol, go home to our districts, and get a better sense of what people want with the surplus."