ST. PAUL, Minn. (AP) - The Minnesota Senate on Monday passed a tax cut plan that is a fraction of the size of the relief bill that earlier cleared the House, setting the stage for difficult negotiations over a compromise that are expected to go right up to the mandatory May 18 adjournment.
Opting for modest changes to property tax rates and relief programs, majority Democrats driving the Senate proposal said they were being careful with tax cuts despite Minnesota’s improved economic situation and a $1.8 billion budget surplus. It’s a contrast to an aggressive House GOP plan, which contains $2 billion-plus in short-term tax cuts that would grow in future years.
The Senate plan, which includes about $240 million for potential tax cuts, passed 42-25 with three Republicans on board.
Democratic Sen. Rod Skoe, the Taxes Committee chairman, said his goal is to put a dent in property taxes for homeowners, farmers and businesses. The exception is railroad companies, which would pay a higher property tax under the premise that local governments need help paying for major safety upgrades along routes. But the companies have threatened to sue if that becomes law.
Republicans opposed to the bill said the railroad clause was a factor. But more broadly, they said Minnesota lawmakers should be coming up with bigger tax cuts two years after they raised taxes to fill a budget hole.
Sen. Julianne Ortman, R-Chanhassen, channeled the memorable 1980s ads from a burger chain asking “Where’s the beef?” in sizing up the Senate proposal. “The question I have is ’Where’s the relief?’” Ortman asked fellow senators, calling the bill a missed opportunity.
Several attempts to bump up the tax breaks - for senior citizens, military retirees and businesses that expand in economically distressed areas - were turned back. Many of those ideas will be revisited as the search for a compromise starts this week.
Democratic Gov. Mark Dayton, whose own $100 million tax proposal is the smallest of the three, offered an opening to House Republicans on taxes by speaking favorably about two elements of their package. He said he is willing to look at exempting more Social Security income from taxes than is now, and he isn’t ruling out a proposed $1,000-per-person standard deduction that would exist only for two years.
But Dayton said he isn’t interested in gradually eliminating a statewide business property tax, one of the most central and costly parts of the House bill.
“It’s just unconscionable,” Dayton said Monday about what he called misguided “tax giveaways” to corporations at the expense of pressing state needs.
Aside from the big-ticket items garnering the most attention, both tax proposals contain smaller measures that aim to make a big impact on public health and child safety.
One is a fitness club expense credit. Both bills have language to give tax protection to people whose employers defray part or all of their monthly gym fees - as long as the employee works out several times per month.
State officials said 39,000 taxpayers could qualify for the fitness tax credit, based on estimates of private-sector employers that now give their workers membership allowances. Not all offered the membership money take it, but supporters of the tax change said it would sweeten the deal.
Another would make child car or booster seats that meet certain federal safety standards free from sales taxes. For now, the Senate is alone in proposing that. A Revenue Department analysis of the bill said nearly 170,000 safety seats purchased each year at an average retail price of $90 would be made exempt from taxes.
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