Minnesota House of Representatives
Republican Caucus

St. Paul, Minnesota Hailed as the most significant property tax reform measure in a generation, Minnesota House Republicans unveiled a comprehensive plan that would reduce property, income, sales and numerous other taxes by $4 billion over the next four years. The plan returns 100 percent of the surplus for the current biennium and the next to taxpayers.

"If Governor Ventura calls his the 'Big Plan', we should call this the 'Bigger and Better Plan'," said House Speaker Steve Sviggum (R-Kenyon). "After more than $2 billion in income tax cuts over the last two years, this plan provides bold property tax reform that ends the shell game of state mandates that drive up local property taxes. But this is about more than property taxes, it is about ending the 'sick tax', helping our businesses be competitive, and sending 100 percent of the surplus back to taxpayers."

Currently, the General Education Levy serves as a huge unfunded mandate that drives up local property taxes. Under the Republican plan, the General Education Levy is eliminated and tight levy limits are put in place to ensure lower property tax bills. After two years, voters will also have the ability to remove levies imposed through reverse referendum. Major rate compression is also used to drive down property taxes for homeowners, agricultural land, commercial/industrial property, seasonal recreational property, and apartments.

"Property taxes amount to a significant part of our family and business budget," said Jay and Sue Blanchard, Lakeville small businesspeople and parents of three. "Cutting property taxes and making sure they don't go up so quickly in the future is a top concern for my family."

The property tax reform component of the House Republican plan also includes innovations designed to spur affordable housing growth. Minnesota's property taxes on apartments are twice the national average rate, which impedes new apartment construction. The House GOP plan immediately lowers rates for newly built apartment buildings and phases in a reduction for existing apartments over four years. It also changes rates to provide new residential construction with rates 22.6 percent lower than under current law.

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"From families to retirees to farmers, the property tax is one of the most oppressive taxes we have," said Majority Leader Tim Pawlenty (R-Eagan). "This package means real reductions for taxpayers and puts in place accountability measures to ensure that. It also puts a priority on helping our businesses be competitive and expanding research and development."

Differing from Governor Ventura, the House Republican tax bill does not extend the sales tax to services and labor.

"The Tax Committee held hearings throughout the state to get the first-hand input of Minnesotans," said Tax Committee Chairman Ron Abrams (R-Minnetonka). "We heard loud and clear that people want real property tax reform and there is no stomach to extend the sales tax to raise the price of everything from a haircut to building a new house. We are presenting a plan for a bold property tax system overhaul that will result in more money in the pockets of all Minnesotans."

Other highlights of the bill include a capital gains tax reduction, reform of the corporate income tax into a single-factor formula, and expanded research and development credits, all designed to spur investment in the state and create jobs. In addition to exempting military pay for overseas servicemen and women from the state income tax, the bill also exempts the first $3,000 of income for National Guard and Reserve members as well. Taxes on charitable gambling are also reduced.

A significant priority for House Republicans, the plan also eliminates the healthcare provider tax, which drives up the cost of healthcare in Minnesota for providers and consumers as well.

"This is a critical issue for access to healthcare," said Mary Klimp, CEO of Falls Memorial Hospital in International Falls. "It serves as a hidden cost to consumers who are greatly concerned with rising healthcare costs. Eliminating this tax is important to ensuring the quality of healthcare in Minnesota into the future."

The bill also returns the entire surplus for the current biennium to taxpayers in the form of a sales tax rebate. According to state law, April 15th was the deadline by which the Legislature was required to take action on the rebate. Although the Governor submitted a plan and the House passed it, the Senate still stands in violation of state law having not acted.

For the 2002-2003 biennium, the GOP bill totals approximately $1.56 billion in tax reductions.

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