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Handcuffs or opportunity

Published (4/1/2011)
By Lee Ann Schutz
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Rep. Linda Runbeck, chairwoman of the House Property and Local Tax Division, explains the property tax section of the proposed omnibus tax bill March 28 on the House floor. (Photo by Tom Olmscheid)The omnibus tax bill sets the financial boundaries for the omnibus bills to follow, but its debate on the House floor March 28 gave both parties the chance to showcase their priorities.

“Having the tax bill done first, we’ll have the numbers that we need to move forward, and I’m excited about that, so people can see where we’re at,” said House Taxes Committee Chairman Greg Davids (R-Preston), the sponsor of HF42. Its focus is creating jobs, putting money into the private sector for job creation and back into taxpayers’ pockets, he said.

Passed 73-59 by the House, the bill now moves to the Senate, where Sen. Julianne Ortman (R-Chanhassen) is the sponsor. The Senate omnibus tax bill, SF27, which she sponsors, differs from the House version, so a conference committee is expected to work out the differences.

House Minority Leader Paul Thissen (DFL-Mpls) said the bill’s provisions “are the handcuffs that chain us into awful choices … with real consequences.” He added that it would substantially raise property taxes.

The bill’s cornerstone provision would decrease lower and middle individual income tax rates from their current levels of 5.35 percent and 7.05 percent to 4.75 percent and 6.75 percent, phased in over three years.

The proposed phase-out of local government aid to Minneapolis, St. Paul and Duluth had one DFLer warning rural members that this bill would end the LGA program, and have a substantial impact on communities with low tax bases.

“This bill is a decoy for rural members. It will end LGA as we know it … about

35 percent of the residents of the state will not benefit from LGA. That is an erosion,” said Rep. Paul Marquart (DFL-Dilworth).

But the provision’s architect, Rep. Linda Runbeck (R-Circle Pines), the House Property and Local Tax Division chairwoman, said rural communities and suburbs are protected from reductions, and that LGA was

designed to equalize basic services among the state’s municipalities, not to fund discretionary projects. She challenged the spending patterns of the state’s two largest cities, calling some projects “frivolous.”

Bill provisions would:

• direct the revenue commissioner to begin talks with Wisconsin with the goal of entering into a new reciprocity agreement that would be effective for tax year 2012;

• create a Minnesota science and technology fund with $1.5 million appropriated in fiscal years 2012 and 2013, and

$3.5 million in each fiscal year thereafter for grants to support initiatives;

• lower the property tax refund from

19 percent to 12 percent of gross rent paid;

• approve imposition of a local sales and use tax by several cities and towns;

• extend eligibility for a market value exclusion benefit for the surviving spouse or approved family caretaker of certain disabled veterans;

• remove several county maintenance of effort provisions that do not reduce federal funds or automatically increase state spending;

• decrease payment in lieu of taxes payments to counties; and

• eliminate the political contribution refund.

In a unique procedural move, the DFL attempted throughout the nearly seven-hour debate to have an amendment from Rep. Lyle Koenen (DFL-Clara City) act as a conduit for several DFL provisions. This offered the DFL the opportunity to talk about increasing the renter’s credit, restoring market value credit and conforming the state tax code to the federal code as it relates to married couples. While the latter provision was accepted, it ultimately went down when Koenen’s amendment was withdrawn.

The bill is made up of approximately

40 separate bills heard in the House Taxes Committee or the House Property and Local Tax Division. At the General Fund bottom line, the bill adds $548 million, largely through reductions to state aids and credits.

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