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In a divided Minnesota Legislature, nothing divides like a $1.2 billion tax plan

MinnPost photo by Peter Callaghan
House Speaker Melissa Hortman: “Tax cuts for corporations and the wealthy have exploded income inequality, and our tax bill works to restore some fairness.”

They don’t even use the same terminology, though the words they do use say a lot about how far apart they are.

The revenue bill proposed by DFLers in the Legislature would provide $1.2 billion, money that constitutes necessary resources to make needed investments, Democrats say. But for the Republicans in the Minnesota House and Senate, the funds aren’t resources — they’re taxes. And the money isn’t an investment — it’s just more government spending.

There are many issues at play in the 2019 session of the Minnesota Legislature that expose the expanse of philosophical space between the DFL and the GOP. But there’s perhaps no bigger divide than that over taxes —  differences that have only gotten larger as the DFL moves leftward on the issue while the GOP moves further to the right.

Restoring fairness or wreaking havoc?

On Monday, the DFL House majority released the tax plan they say will add $1.2 billion to the state’s revenues of around $49.8 billion over two years.

House Majority Leader Ryan Winkler
MinnPost photo by Taryn Phaneuf
House Majority Leader Ryan Winkler
“Tax cuts for corporations and the wealthy have exploded income inequality, and our tax bill works to restore some fairness,” said House Speaker Melissa Hortman, DFL-Brooklyn Park. “We close corporate tax loopholes and we ask the wealthy to pay their fair share while expanding the working family tax credit and providing property tax cuts for families and seniors. But years of trickle-down economics and tax cuts for the wealthy have left our schools underfunded,” she said.

Without increases in funding, Hortman said, class sizes will increase, teachers will be laid off and districts will have to get basic funding from local property tax payers.

House Majority Leader Ryan Winkler said the proposal shows that DFLers are putting their tax votes where their mouths were during the election. “We can’t have this for free,” the Golden Valley lawmaker said.

“If we want a world-class education system … we have to pay for it,” which also goes for transportation, he said. “And we’re not shy about putting the price on the table that it costs to actually do these things.”

MinnPost photo by Peter Callaghan
State Sen. Roger Chamberlain
Both sides argue that their positions on taxes speak to populist movements among voters, stances that will be rewarded at the 2020 election. And Republicans’ response to the DFL plan seemed to be offering a test of 2020 campaign messages. “If they get any part of this, there is no way this state can succeed and support this spending. It will shrink and it will disappear,” said Sen. Roger Chamberlain, R-Lino Lakes, who chairs the Senate Taxes Committee. “If you want less of something, you tax it. That’s why they tax cigarettes. If you want more of something you reduce the tax.”

“What math, what universe do you raise taxes $1.3 [billion] in two years and $4 billion over four and say that’s a tax reduction for the state of Minnesota,” Chamberlain said.  “That math doesn’t work in any universe or any planet or any dimension.”

Republicans seemed to be competing with each other to set the dollar amount of the DFL tax increase proposals. Chamberlain called the tax bill $4 billion over four years  — and $8 billion if a 20 cent gas tax hike and is approved and if DFLers succeed in repealing the repeal of the 2 percent provider tax.

Not to be topped, House Minority Leader Kurt Daudt, R-Crown, tossed in cost projections for a paid family leave program to proclaim that “Democrat Tax Increases Top $12 billion (!).”

“With a $1 billion budget surplus these astronomical tax hikes are unnecessary and will wreak havoc on Minnesota family budgets,” Daudt said in a statement.

What the DFL plan would do

House Taxes Committee Chair Paul Marquart, DFL-Dilworth, said a lot of the added revenue in his plan comes from using two tools that were provided to states by the 2017 federal tax reform bill, the same bill DFLers blame for expanding income inequity.

One, known as repatriation, lets states claw back the foreign profits of state-based corporations. The other lets states tax assets that have been moved to tax havens to avoid state and federal taxes. That one goes by the acronym GILTI, for “Global Intangible Low-Taxed Income.”

“We’re very aggressive on this, and we should be” Marquart said. “We owe it to our residents to get those dollars that should be here in Minnesota.”

The DFL plan also creates a new capital gains tax on the sale of assets other than agricultural land that are worth more than $500,000. The 3 percent rate on that tax would be nearly as high as California’s tops-in-the-nation rate.

House Taxes Committee Chair Paul Marquart
MinnPost photo by Peter Callaghan
House Taxes Committee Chair Paul Marquart said a lot of the added revenue in his plan comes from using two tools that were provided to states by the 2017 federal tax reform bill, the same bill DFLers blame for expanding income inequity.
The DFL leaders said they will use the revenue to pay for increases in state support for education and colleges as well as to reduce taxes on lower-income families. The biggest reduction would involve exempting from taxes all income up to $32,900 for a family of four, which would be the third-highest “zero-tax bracket” among U.S. states.

The House DFL plan also adds eligibility for the state working family tax credit and exempts more Social Security income from state taxation. The state would also increase the standard deduction to the same $24,000 for married filers as is in the federal tax law. Marquardt estimates that two-thirds of tax filers will see a reduction in taxes and that 93 percent will choose not to itemize their personal income tax filings.

Gov. Tim Walz also has a tax plan, which takes the federal tax reform authority to reclaim foreign-based income and reduces some corporate tax deductions. Like the House DFL plan, it also expands the family tax credit and the amount of non-taxed Social Security income so that 56 percent of seniors would not pay taxes on income from the program.

What the GOP wants

The Senate GOP tax plan will be released after the Easter-Passover legislative break, Chamberlain said. In previewing the plan, though, he returned to a line Republicans have rehearsed throughout the session.

“I’ve been saying for a couple of years, my goal here in the Minnesota Senate is to make life simpler and easier for Minnesotans, to relieve them of some of their burdens and give them some opportunity and hope,” he said.

The proposal is likely to include some lower-bracket rate cuts, similar to what was in the Senate GOP plan in 2018 that was vetoed by then-Gov. Mark Dayton. But Chamberlain was not interested in repatriation and tax-haven provisions suggested to the states by fellow Republican Paul Ryan, the former U.S. House Speaker from Appleton, Wisconsin.

“We don’t affiliate with Paul Ryan,” Chamberlain said. “God bless him, but he has nothing to do with the great state of Minnesota. We affiliate with us and we do what we think is right for the state of Minnesota. That repatriation money, if they try to grab that and tax it, there will be a lawsuit. It is unconstitutional.”

(Marquart said he is confident both tax measures are legal and variations of what he’s proposing have been successfully defended in the past.)

A ‘long way to go’

Do the vast differences between DFL tax proposals and GOP rejection of those proposals set up an intractable stalemate as the session approaches May 20 adjournment?

Walz doesn’t think so, necessarily. “That’s the art of democracy, it’s the art of compromise,” the governor said. “I still remain hopeful. This is hard work. I do think there’s some goals we can agree on. Some of the policy proposals, though, there is a vast difference.”

There are suggestions that the House and Senate budget bills being finished this week in each house are starting positions. But is there something in between tax increases and no new taxes?

Republicans say no. But Walz is outwardly optimistic. “I know there’s a tendency in this business to shoot way to one side of your proposal with the idea, so that then the middle place is palpable to both,” he said. “There may be a little bit of that going on. We’ll see.”

With actual bill language being available, the Senate has to show what won’t be funded and what will, said Walz. “It’s one thing to say to go out in front of people and say we’re not going to raise fees on you,” he said. “It’s quite another to show how many teachers’ jobs it’s going to mean back in your home community. That’s what’s starting to come out now. There’s a long ways to go.”

Chamberlain said he would conduct a hearing on the Walz tax plan, but he described it as a courtesy. He also said he wouldn’t allow his committee to take a vote on the plan.

When asked why not, he offered a simple answer: “It’s a tax increase,” he said.

Comments (42)

  1. Submitted by Paul Udstrand on 04/11/2019 - 10:37 am.

    These Republican (and neoliberal) economic assumptions regarding taxes and government have always been fundamentally incoherent. The idea that there’s even a difference between government spending and public investment is a product of ignorance and irrational thinking.

    We need to stop pretending that Republicans are even trying to participate in any rational form of governance or economic analysis.

    I don’t know why Republicans see Somalia as their preferred model of government and economy, but it’s obviously a really really really bad model. If you don’t like Somalia fine, the fact is that Republicans can’t point to a single country or economy anywhere in the world that out performs the US much less any other developed democracy. I don’t know why these guys hate America so much but we have to stop pretending that their ongoing and pernicious efforts to destroy it are part of a “normal” political process.

    • Submitted by Paul Udstrand on 04/11/2019 - 11:09 am.

      Sorry, I meant to point out that Republicans point to a better economy or government based on the model they promote. Obviously we can point to countries that have better health care systems, but NONE of them look like Somalia.

    • Submitted by Bob Petersen on 04/11/2019 - 01:53 pm.

      Never has any country been able to tax its way into prosperity. People are sick of being taxed and taxed and taxed. Look what is going on in New York. They are leaving that state and they are facing a shortfall. People are leaving California because of the taxes. We are close to those states and it’s always the same, we need more ;investment.’ It’s not investment, it’s the government spending money that is not theirs. We just went through the largest tax increase in state history and you are in full agreement. No one is against paying taxes, but why does it always have to be more and more. If the DFL were true leaders, they would prioritize rather than just say give them more money. But they just want more and more money, no matter how the economy is going.

      • Submitted by ian wade on 04/11/2019 - 04:00 pm.

        Uhhh, people aren’t leaving California

        Oh, and they’re not leaving New York either

        I’ve also noticed that the conservatives that still whine about Minnesota’s tax rate always have some sort of reason why they haven’t left here either. I’m sure South Dakota looks great until they realize that the only career path there is in the hospitality industry.

        • Submitted by Betsy Larey on 04/11/2019 - 07:37 pm.

          I left. There was no way I would keep my residency in MN and pay one of the top rates in the country. And even worse this year, as deductions are capped. High tax states get hit with a double whammy. My sister is leaving Connecticut, same thing. I think people are okay with paying taxes, but not year after year increases. Last time I looked, 72K was considered the top rate. That’s a teacher or a firefighter. It worked back in the 70’s, but we saw large migration from Gary Indiana and Chicago. People in those states realized what great social services MN has and moved right in. I remember they could get a check instantly, unlike most states with a 6 month waiting period.

        • Submitted by cory johnson on 04/12/2019 - 01:31 pm.

          There are plenty of people dependent on government moving into California and NY. Just like Minnesota. It’s the wealthy and middle class (you know, taxpayers) leaving.

      • Submitted by Frank Phelan on 04/11/2019 - 04:02 pm.

        Mr Peterson, once again you are speaking of the “largest tax increase in state history”. The last time you did that, I asked you to provide specifics. How are you measuring that? Are you using inflation adjusted dollars? Are you measuring that as a percentage of state GDP?

        Without some specifics, it’s just rhetoric.

      • Submitted by Paul Udstrand on 04/12/2019 - 08:28 am.

        “Never has any country been able to tax its way into prosperity. ”

        Like I said, simply incoherent. You may as well try to teach a dog how to play a violin.

        Meanwhile why don’t you just point to the more “prosperous” country that collects no taxes, or even dramatically lower taxes than any of the developed nations? You do understand the term: “developed” right?

    • Submitted by cory johnson on 04/12/2019 - 01:32 pm.

      Your constant Somalia reference is a racially charged statement

      • Submitted by Matt Haas on 04/12/2019 - 09:49 pm.

        No, it’s an objective analysis of a nation with the sort of toothless, to non-existent, sort of government that conservatives advocate. Personally, I prefer to use the inevitable transformation og such states into feudal fiefs (as was seen in Somalia and the “warlords” who held regional power) to point out that we HAVE seen the realization of the conservative utopia, it’s just that we needed a revolution to break free of it.

      • Submitted by Paul Udstrand on 04/13/2019 - 09:38 am.

        “Your constant Somalia reference is a racially charged statement”

        That’s funny, but I’ll repeat: … why don’t you just point to the more “prosperous” country that collects no taxes, or even dramatically lower taxes than any of the developed nations? You do understand the term: “developed” right?

        We CAN talk about ALL of the OTHER failed nations and economies your model has produced if you really want to do that.

      • Submitted by Paul Yochim on 04/14/2019 - 07:01 pm.

        When you have lost the argument, pull the race card.

  2. Submitted by Gene Nelson on 04/11/2019 - 12:03 pm.

    The results of repub behavior is quite obvious in failed states such as KS, LA, MS…to name a few…but also that the vast majority of WORST K-12 educational systems and poverty are located in repub states.

  3. Submitted by Jim Smola on 04/11/2019 - 01:00 pm.

    The DFL plan promotes future investment in Minnesota. Supporting education and infrastructure keeps Minnesota a national leader. The Republican tax plan is the same old rehash of the past. They have only one plan—cut taxes! Cutting income taxes doesn’t address future needs of the state and doesn’t address income equality. The idea the surplus is based on high taxes is false argument that doesn’t take into consideration that more people are working and the economy has been on an upswing.

  4. Submitted by Curtis Senker on 04/11/2019 - 02:22 pm.

    Didn’t Mark Dayton just spend the last 8 years squeezing a fair share out of the wealthy, and tossing bundles of fresh greenbacks on the public school bonfire? Didn’t Early Childhood Education get hundreds of millions extra? Didn’t he expand all day kindergarten?

    Did I dream all that, or is Ms. Hortman unaware it happened?

    It’s like “Groundhog day” in Minnesota whenever the left has control.

    • Submitted by Frank Phelan on 04/11/2019 - 04:03 pm.

      No, Dayton did not do that.

      • Submitted by Tom Anderson on 04/11/2019 - 05:36 pm.

        You are correct, the Legislature passed bills that Governor Dayton signed into law that raised taxes on the wealthiest Minnesotans, expanded all day kindergarten and early childhood education, and raised per pupil spending every year as he promised that he would do.

        • Submitted by Frank Phelan on 04/11/2019 - 06:45 pm.

          Taxes were raised on the wealthiest. And they are still doing great. Better than us working stiffs.

        • Submitted by Dave Carlson on 04/13/2019 - 10:31 am.

          And a lot of the education spending in Dayton’s first term was just trying to catch up from the cuts and “creative accounting shifts” that severely curtailed adequate school funding during the Pawlenty administration.

    • Submitted by Frank Phelan on 04/11/2019 - 04:05 pm.

      And if you want to see the definition of Ground Hog Day, see the ever present GOP tax plan (where taxes are ALWAYS too high) and the GOP Pentagon plan (where spending is ALWAYS in need of increasing).

    • Submitted by Paul Udstrand on 04/12/2019 - 08:33 am.

      “Didn’t Mark Dayton just spend the last 8 years squeezing a fair share out of the wealthy, and tossing bundles of fresh greenbacks on the public school bonfire? Didn’t Early Childhood Education get hundreds of millions extra? Didn’t he expand all day kindergarten?”

      Again, simply incoherent. Even if we agree that Dayton did all of this diabolical spending for 8 years… exactly what kind of hell hole do you think we live in Curtis? Please describe the catastrophe that ensued? Oh, right, you’re just whining about having to pay taxes again.

      • Submitted by Curtis Senker on 04/12/2019 - 12:08 pm.

        Hold it friend,

        It’s Ms. Hortman and her fellow leftists doing all the incoherent screeching about impending catastrophes, not I. According to Hortman, Dayton was a complete and utter failure; nothing he or the Democrat legislature did for the last 8 had the slightest effect. Sad, I guess.

        I wouldn’t describe where you live as a “hell hole”, friend. It’s more correctly described as bizarro world.

        • Submitted by Paul Udstrand on 04/13/2019 - 09:32 am.

          “It’s Ms. Hortman and her fellow leftists doing all the incoherent screeching about impending catastrophes, not I. According to Hortman, Dayton was a complete and utter failure; nothing he or the Democrat legislature did for the last 8 had the slightest effect. Sad, I guess.”

          We didn’t really NEED another example of an incoherent rant but I’m not going to complain.

          I will point out the historical fact that for the last 6 of Dayton’s 8 years Republicans controlled the legislator AND the budget. So whatever success or failure you try to attribute to Dayton and Dayton alone is quite facile.

          • Submitted by Curtis Senker on 04/15/2019 - 07:54 am.

            If you could cite one, just one instance where Dayton failed to get a spending increase he wanted, I think we’d all be appreciative.

            I seem to recall Dayton vetoing budgets that didn’t include all the funding he had demanded. Remember now?

            To be sure, GOP’s record during the Dayton administration was nothing to be proud of, friend. They buckled and capitulated at every turn. Not that they had any chance of advancing the cause of commen sense, but they could have given it a bit more effort, in my opinion. But please do not attempt to argue they had things their way; the record is quite coherent and unambiguous.

            In any case, as I’ve correctly observed, all of the legislative wins Dayton accrued appear to be for naught, as his leftist ilk are now claiming disaster is still imminent and fresh piles of cash are absolutely necessary lest the citizenry experience unimaginable horrors.

            • Submitted by Paul Udstrand on 04/15/2019 - 11:02 am.

              Dayton never got all the spending increases he wanted, even when Democrats controlled the legislature. Anyone can look that for themselves. Democrats dialed his budgets back out of fear of “over reach”, and then they lost anyways.

  5. Submitted by Joel Stegner on 04/11/2019 - 03:18 pm.

    Republicans love to refuse to allow votes. Whatever came to the idea of standing up and being counted?

  6. Submitted by Ray Schoch on 04/12/2019 - 08:33 am.

    Frank Phelan’s “Ground Hog Day” comment seems the most accurate of the several presented. If the DFL had proposed NO revenue enhancement, the local Republicans would then be demanding, just as fiercely, that taxes be reduced. The impression left by Republican arguments is that taxes are evil, in and of themselves, and that there’s no such thing as a public investment. It’s an argument that might fly in libertarian circles, or at the local millionaires’ club luncheon, but it has little or no relevance in the real world, and mostly reveals the prejudices and ideology of its proponents.

  7. Submitted by cory johnson on 04/12/2019 - 01:35 pm.

    What happens when all this money is spent? Oh right, more investments. And again DFL will hope no remembers the last time these investments were made. Just like my deadbeat brother.

    • Submitted by Matt Haas on 04/12/2019 - 09:53 pm.

      Gee, its almost like keeping a civilized society running and successful is a neverending task. Whoda thunk it? But then, I wouldn’t abandon family either, so what do I know?

      • Submitted by cory johnson on 04/13/2019 - 09:43 am.

        Civilized society? Not sure about that. And a black hole of government spending is hardly the mark of success.

      • Submitted by Paul Udstrand on 04/13/2019 - 09:48 am.

        Surely you jest Matt? You’re not actually suggesting that government is an ongoing project are you? Obviously the Constitutional requirement that legislators create more than one budget… ever… is a travesty of common sense! Why create a budget every two years when the all the money is just going to get spent?

        You liberals and your cockamamie schemes.

        • Submitted by cory johnson on 04/13/2019 - 03:52 pm.

          Talk about incoherent. Spend, spend, spend without any regard to effectiveness or necessity of the spending. That’s not actually governing and it’s not really a budget when you expect a blank check. To leftists every program (except the military) is absolutely vital even it’s been proven not to work.

          • Submitted by Paul Udstrand on 04/14/2019 - 08:47 am.

            “Spend, spend, spend without any regard to effectiveness or necessity of the spending. ”

            Cut cut cut without any regard to the damage being done to essential services and infrastructure.

            By the way the only Party that believes in unsustainable spending is Republicans, who keep cutting revenue and hoping magic will make up the difference. That’s why Republicans always produce deficits. This is why the Republican claims of fiscal “responsibility” have always been quite comical.

            Meanwhile the basic economic fact that public “spending” actually grows and sustains economies and strengthens communities is obviously beyond comprehension. Again, show us where your Somali Model is working?

            The idea that government spending happens without any “regard” betrays a fundamental ignorance if not outright hostility regarding the very nature of representative democracy. If you think politicians just sit around and make up stuff to spend money on, you simply don’t understand how your government works. Frankly, people with this mentality have no business working on important budgets of any kind, which is why “working” with Republicans is probably and exercise in futility.

            • Submitted by cory johnson on 04/14/2019 - 12:46 pm.

              Where we differ is leftists think every single service is essential. And every year you come up with more essential services. The fact that you think the government should fund PBS and NPR, and anytime the reductions in growth of spending is discussed (not cuts) leftists howl and moan is proof.
              I happen to agree that this “reach across the isle” nonsense is a waste of time as well. Especially when the leftist definition is “if only the Republicans would cave and agree to everything we want.”

              • Submitted by Paul Udstrand on 04/15/2019 - 09:37 am.

                “Where we differ is leftists think every single service is essential.”

                No, where we differ is YOUR reliance on stereotypes rather than reality. Every government service has a constituency in the community, whether it’s farmers who need loans, or single mothers living below poverty levels on minimum wages. No one is “growing” the government just to grow the government. The difference is liberals actually care about whether or not “spending” is necessary, we don’t just assume that it isn’t.

                We can all point to spending we don’t agree with, Trumps wall for instance. If you’d rather spend billions on the wall than on housing for military families I’ll let you defend that priority, but you claim to be only one in the room who worries about spending.

                We do agree on the nature of bipartisanship… but you should understand, I don’t expect Republicans to “cave” in any way; I expect they will lose, and implode, and fade into irrelevancy. We’re not going to work with your or reach out to you… we’re just going to defeat you (politically), it’s the only option you’ve left us.

  8. Submitted by Paul Udstrand on 04/15/2019 - 01:34 pm.

    Anyways you can see from the comments here (that actually do represent the Republican Party mentality) that there’s simply nothing to work here regarding Republican proposals. The incoherent perspective that flows out the Somali model is simply beyond redemption.

    This begs the question however how such a ridiculous mentality could gain so much political traction in the US in the first place? It can be a complex analysis but in a nutshell the reason this magical thinking gained so much traction is that Democrats and “centrist” gave it traction. This idea that it made sense to meet nonsense half way and give magic a chance was a catastrophic abdication of political responsibility.

    The fatal flaw of the “centrist” mentality was the assumption that Republican would be content to “share” power. This delusion should have been abandoned two years into the Reagan presidency at the latest.

    Whatever. At any rate its way past time that Democrats and American liberals renounce this facile notion that we should only pursue those policies and objectives that require Republican support. We can always work with whomever wants to solve problems, but there’s no reason to include those who’s only interest is in sabotaging those efforts.

  9. Submitted by Dennis Wagner on 04/17/2019 - 07:51 pm.

    You know this is an interesting discussion, but pray tell an un-agreeable conclusion. Lets juxtaposition a few items: Example: Our National defense is 10X the nearest “competitor” will the republicans in this discussion suggest that we can shave that budget by ~ 9X because we are just spending year after year with no results? So. if we can reduce our federal outlay, perhaps a few more $ to the local outlay, and wa-la a tax deduction as well. If memory serves me, Defense spending is ~ $720B cutting it 90% is ~ $648B (You all know that MN is ~ #3 in the amount of per capita tax $ to the fed) A little creative math suggests the tax relief to MN would be ~ $47B. Now that is one hell of a good deal, So who is jumping on board?

    • Submitted by Paul Udstrand on 04/18/2019 - 11:30 am.

      I’m in. But that’s predictable.

      • Submitted by Dennis Wagner on 04/18/2019 - 04:46 pm.

        Thanks for the support Paul, always amazes, folks cry, argue, complain, point fingers, … about deficit spending and taxes, Then when you show them a road to erase the deficit spending and reduce taxes they are no where to be found, seen, heard! What is the term for that, hypocracy?

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