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Finally, mostly smiles with Minnesota’s tax-cuts package heading to governor Friday

The Senate passed a $444 million package midafternoon 58-5. Shortly after 4 p.m., the House approved it 126-2. Dayton signed the bill early Friday evening.

Dayton said he’d sign the tax-cut package Friday evening.
© Minnesota House of Representatives

If you’re confused over whom to blame for a delay in tax cuts at the Legislature this week, you’re not alone.

On Tuesday, DFL Gov. Mark Dayton blamed Democrats in control of the Senate of using a time-sensitive package of tax cuts for Minnesotans as leverage to move a stalled office building for lawmakers forward.

By Thursday, Dayton was standing side by side with those same Senate Democrats pointing the finger at Republicans, who refused to offer up needed votes to suspend legislative rules and pass a tax bill immediately.

But on Friday, most lawmakers were all smiles as the $443 million package of tax cuts passed off the Senate floor on a bipartisan 58-5 vote. Shortly after 4 p.m., the DFL-controlled House followed suit, passing the measure 126-2. Updated: Dayton signed the bill early Friday evening.

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Lawmakers were trying to pass tax cuts quickly because many Minnesotans have not filed their tax returns yet. The Minnesota Department of Revenue estimates that more than 1 million people file their returns sometime between April 1 and the April 15 deadline.

“This is the first time in my memory that the Legislature passed a major tax bill less than a month after they came into session,” Dayton said. “The urgency was apparent.”

Tax cuts and rainy-day funds

The final tax bill would overturn three business sales taxes that were passed last year, including a warehousing tax that was to go into effect April 1. It also conforms some state tax and federal tax laws.

Conformity will benefit more than 50,000 low-income families who will be eligible for larger benefits under the Working Family Credit. It will also benefit families facing foreclosure, students who would qualify for new student loan deductions and adoptive parents, among others.

The bill does not conform state and federal tax laws when it comes to the marriage penalty, however, a point of contention with Republicans. 

“The most important [federal conformity] provision isn’t even included,” Sen. Julianne Ortman,” GOP-Chanhassen, said. “Minnesotans are waiting for their tax relief.”

The proposal also would put an additional $150 million in the state’s rainy-day budget reserves.

Senate Republicans offered about a dozen amendments to the bill Friday, many of which tried to reduce money for the reserves to allow broader tax cuts on everything from capital equipment purchases to sales tax reductions.  All the amendments failed.

“This bill doesn’t go nearly far enough,” Sen. Paul Gazelka, R-Nisswa, said. “I’m a yes [vote] hoping we will do more in the future.”

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Taxes Chairman and bill author Rod Skoe, DFL-Clearbrook, vigorously defended the Senate’s push to buffer the budget reserves.

“You can’t run a state well when you’re going from one crisis to another. I think we should avoid it,” he said. “I think we made a pretty major step today in building the reserve to act as a shock absorber against that.”

Past a major hurdle

Just three weeks into the 2014 session, the passage of the tax bill already eliminates a major hurdle in lawmakers’ work this year, spending nearly half of a $1.2 billion budget surplus.

“This session is moving along very fast on the important fiscal conditions we have to deal with,” Bakk said. “There’s been an incredible amount of work done so far.”

But tax talks aren’t over for the year.

Legislators this session also are planning for a second tax cut bill, which will likely include property tax relief and sales tax exemptions for local governments operating under joint powers arrangements. 

Lawmakers have an agressive committee schedlue over the next two weeks to put a second tax bill together. Coming later in the year, the second tax proposal could easily get tangled in end-of-session political negotiations. 

“While this is significant progress for this session and for Minnesota,” House Speaker Paul Thissen said, “we have more work to do.”