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Two views on taxes

Published (5/20/2011)
By Lee Ann Schutz
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The session-long debate over new revenue to solve the state’s projected $5.6 billion deficit came to a head May 17 as the House considered the governor’s tax proposal in the morning and the conference committee report on the omnibus tax bill late into the evening.

“This is probably our most important vote for our work ahead, for it really is a parting of the roads of the vision for the state, and for the conclusion of session,” said House Majority Leader Matt Dean (R-Dellwood). “We’ve had this debate all session. … How much are we really going to grow government, and do we need new revenue?”

Sponsored by Rep. Greg Davids (R-Preston) and Sen. Julianne Ortman (R-Chanhassen), the conference committee report on HF42*/ SF27 was passed 71-58 by the House after midnight. Later in the day, it was passed 37-28 by the Senate. The governor’s budget, in the form of a minority report to HF1261, ended in a 73-60 vote to not accept the report on May 17.

With an expected veto of the omnibus tax bill and session having to end by May 23, the philosophical divide appears to be intensifying between the Republican majority and Gov. Mark Dayton.

Republicans affirmed their commitment to “not a penny more” in new revenue. Their $34 billion budget is based mostly on cuts and fund transfers, while DFLers characterized Dayton’s approach as “fair to all people of Minnesota.”

The governor’s $35.8 billion budget proposal would raise taxes on a married couple making over $300,000 in taxable income and single taxpayers making more than $180,000 annually.

In an effort to compromise, he reduced his plan May 16 to $1.8 billion in new tax revenue from his initial proposal to raise $3.36 billion in new taxes. Throughout the week, however, Dayton stood firm on that amount, along with $1.9 billion in budget reductions.

The conference committee agreement would provide $202.71 million in tax relief during the 2012-2013 fiscal biennium, including a statewide property tax reduction; modification to the K-12 education tax credit to include private school tuition; an increase in the research and development credit; a phased-in income tax subtraction for those receiving military retirement pay; and several sales and use tax exemptions, including on downloadable ringtones.

A new Minnesota Science and Technology Authority would be established, and would receive $500,000 to provide grants for research projects developed by a college or nonprofit organization or a qualified science and technology company.

The bill would also reduce tax credits over the biennium by $925.26 million. The greatest amount ($198.95 million) would come from reductions to the renters’ property tax refund, repeal of the Sustainable Forest Incentive Act and elimination of the political contribution refund.

Changes to the state’s local government aid and county aid programs are targeted to save $382.74 million in the biennium. The bill would also extend limits on the ability for local units of government to raise its levy for two years.

The bill changes the homeowners’ market value credit, which DFLers say will create an automatic property tax increase for many homeowners and businesses. It also proposes a $50 million reduction in the state’s general levy for commercial industrial property in 2012-2013.

Several sales and use tax conformity issues are also addressed.

“This is a very clear choice between two competing philosophies of government,” said Rep. Doug Wardlow (R-Eagan) “It’s about Minnesotans keeping what they own or helping government take more money. … Our founding principles include economic liberty. We need to trust in the people and their choices.”

But DFLers said that protection of Minnesota’s most vulnerable and tax fairness are priorities reflected in Dayton’s proposal.

“A budget and a tax bill are a statement of priorities,” said Rep. Kerry Gauthier (DFL-Duluth). “What I see is 140,000 people losing health care, but ‘not a penny more’ from the wealthy people of Minnesota. … This budget has always been about two different Minnesotas.”

House Minority Leader Paul Thissen (DFL-Mpls) chastised Republicans for protecting “special interests” at the expense of the state’s most vulnerable. “This debate is about how to build a better economy for the state. We are saying if we build a strong middle class; that is what will build a strong economy.”

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