GOP tax bill bets on sunny days ahead

The House and Senate are expected to vote on a tax bill today that would cut business taxes. The measure pays for the cut by relying on money that isn’t guaranteed to be there.

The plan agreed on by a House/Senate conference committee freezes the statewide business property tax, creates a tax break for investors in new businesses and provides an upfront sales tax exemption for businesses that buy new capital equipment. It also includes Gov. Dayton’s initiative to provide a tax credit to businesses that hire veterans.

“We’re hopeful the governor will sign it,” Sen. Julianne Ortman, R-Chanhassen said.

That’s a big question mark, since Gov. Dayton has repeatedly said that he wants any spending, including tax cuts, to be offset in some way.

In the tax bill, Republicans are betting that the economy will continue to improve, which would mean more tax revenue to the state.

The plan directs Minnesota Management and Budget to book higher than expected tax collections from February and March to pay for the changes. Typically, lawmakers rely on the February revenue forecast as they make tax and spending decisions, not the partial information that comes from monthly tax reports.

Several budget analysts say the April Economic Update, which GOP leaders cite as evidence they can pay for the bill, doesn’t provide a full picture of the state’s budget because it focuses on tax revenues and not the spending side of the ledger.

The bill would also pit tax cuts for businesses against school funding. That’s because current law says any surplus money from the November forecast would be used to pay back a K-12 school payment delay. This bill short-circuits that process by capturing tax revenue that hasn’t been recorded in the forecast yet.

“We have the authority in the law to bring that back earlier by statute if the governor signs it,” Ortman said.

Another hurdle is convincing Dayton to sign a bill that would create a deficit of $145 million in the next biennium.

Republicans are pinning their hopes that Dayton wants a Vikings stadium bill and is willing to give up on his pledge to not increase the deficit to get it.

GOP legislative leaders have said repeatedly that the Vikings stadium should not be linked to any other issues, but they moved off that talking point on Saturday. They now say their top priority is enacting a tax bill.

The proposal includes several tax cuts that have been pushed by business groups. In addition to the freeze on business property taxes, it extends and expands a tax break for companies that establish data centers in Minnesota. It also includes a tax break for the Mall of America expansion and it exempts the city of Woodbury from getting voter approval to build the Bielenberg Sports Center. A tax break for breweries has also been expanded and extended. That measure came at the request of St. Paul-based Summit Brewing.

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