Tax conformity report passes House despite governor’s warning

With five days left in the legislative session, the House cleared one of the biggest hurdles it had heading into 2018: conforming Minnesota’s tax code to the recent overhaul in Washington, D.C.

On Tuesday, the House suspended its rules and passed the conference committee report on HF4385 by a 78-50 vote, sending the measure to the Senate, which is expected to take up the measure Wednesday.

Gov. Mark Dayton, a DFLer, said Monday he wouldn’t sign the bill unless the Republican-controlled Legislature approved emergency funding for schools, a proposal the governor offered on May 1 – 19 days before lawmakers are constitutionally required to finish their jobs.

Mentioning the conference committee took out items the governor didn’t like during negotiations, Rep. Greg Davids (R-Preston), the bill sponsor, said, “This is a bill clearly that the governor could sign and should sign. … This is a great bill. It is a masterpiece, as you’ve heard.”

The agreement calls for first-tier tax rate to drop from 5.35 percent to 5.3 percent in tax years 2018 and 2019 and 5.25 percent beginning in tax year 2020. The second-tier tax rate would drop from the current 7.05 percent to 6.95 percent in tax years 2018 and 2019 and 6.85 percent beginning in tax year 2020.

The changes would result in a $137.1 million revenue decrease this biennium and $341.1 million in the next.

Davids claims 99.8 percent of Minnesotans would see tax reductions or be “held harmless” by the changes.

Rep. Jim Davnie (DFL-Mpls) pitted the bill as a break for corporations on the backs of Minnesota’s education system. He wasn’t alone.

“Unfortunately, this bill went in the wrong direction,” said Rep. Paul Marquart (DFL-Dilworth), who voted for the bill the first time but voted against it on Tuesday. “We have to create a win for our working families, and this bill simply doesn’t do that.”

Rep. Gene Pelowski Jr. (DFL-Winona), Rep. Mike Sundin (DFL-Esko) and Rep. Mary Murphy (DFL-Hermantown) joined the Republican majority in voting for the bill.