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

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

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.

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.”

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.”

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Comments (10)

  1. Submitted by Leslie Davis on 03/22/2014 - 06:54 am.

    Money

    Why are we borrowing $1.0 billion, plus adding a transaction fee of $1 million for the right to do that, to fix our roads, when we have a $1.2 billion surplus?

    • Submitted by Paul Brandon on 03/22/2014 - 01:39 pm.

      Because right now

      interest rates are extremely low, so it’s cheaper to borrow and invest the surplus in our infrastructure, which will otherwise cost more in the long run.
      While a million dollars sounds like a lot, it’s 0.1% (one tenth of one percent) which doesn’t change the investment cost significantly.

      In other words, it’s a case of spending now when money is cheap as opposed to put it off until we have to borrow at higher rates due to the inevitable inflation.

  2. Submitted by Mike Downing on 03/22/2014 - 07:23 am.

    Increase taxes one year to reduce taxes in an election year…

    Democrats must subscribe to “new math” since they increased taxes by $1.2 Trillion in 2013 in order to “decrease taxes” by $444 in 2014 which is an election year.

    • Submitted by frank watson on 03/22/2014 - 07:54 pm.

      Mike

      The state faced a 700 million dollar deficit last year. The Dayton asked and got from the DFL a 2 Billion dollar tax increase. You listed trillion. This year we have projected 1.2 Billion surplus of which Dayton and the DFL feel you should receive a 444 million refund of some sort. Not sure what is going to happen to the $800 million leftover.

  3. Submitted by Barbara Gilbertson on 03/22/2014 - 08:28 am.

    Good move, finally

    But then there’s this: “…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.” Seriously? Dems are my people, but this reeks.

  4. Submitted by Robert Gauthier on 03/22/2014 - 10:34 am.

    There is a difference between

    Quarterly cash flow and budgeting. The state is still paying schools back, still fixing a number of short term debts handed to them by TPaw and his buddies. Also, there are a number of savings via cuts Dayton has imposed. The state’s cash position is due to economic recovery, I.e. Capital gains and sales tax, nt just income taxes. The reasonable thing to do is keep bonding aggressively due to low interest rates (costs to stAte) and aggressive repair of infrastructure and fixing the property tax messes Republicans put on the state. That is win/win

  5. Submitted by John Appelen on 03/23/2014 - 11:09 am.

    Borrowed money

    Future tax payers still have to pay back the principal on that Billion dollars.

  6. Submitted by John Appelen on 03/23/2014 - 11:14 am.

    Try 3

    Since the DFL left the marriage penalty in place. Does this mean they do not want to encourage marriage?

  7. Submitted by Matt Goshgarian on 03/24/2014 - 08:56 am.

    When will these changes get updated into TurboTax?

    Does anyone know when these new tax changes will be updated in TurboTax software? Should we wait another week to get the latest software updates and then file?

    • Submitted by Jonathan Ecklund on 03/24/2014 - 04:02 pm.

      April 3rd

      I _think_ the date they are asking people to wait to file until (for the Minnesota tax updates) is April 3.

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