House starts budget push with tax-cut bill
The Minnesota House took a first-out-of-the-gates bite at the state’s surplus Thursday, debating a $1.35 billion tax relief measure.
Lawmakers passed the bill on an 80-52 vote.
House Republicans made their tax bill the first component of a new state budget to get a vote. Several spending bills will follow in the coming week.
House Speaker Kurt Daudt, R-Zimmerman, said it’s a signal that tax cuts are the main GOP focus this year when splitting up a projected $1.65 billion surplus. He said taxpayers must come first.
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“They are the ones who created this surplus. We want to make sure Minnesotans share in the prosperity here in the state. We think it’s the best thing to do with the money they provided us is reinvest it back in Minnesotans.”
The tax relief comes in the form of targeted income tax credits, increased exemptions for Social Security income and property tax cuts for farmers and businesses.
Rep. Paul Marquart, DFL-Dilworth, said there are parts of the proposal he likes but warned the total package gobbles up too much of the state's projected budget surplus.
"When you look at the priorities of the majority, they have five dollars in tax cuts for every one dollar of investment in our students," Marquart said while holding out the possibility of voting for the bill.
Daudt refuted the calculation, noting that the amount of new education spending in their budget proposal is similar to the level of tax cuts.
“For those who want to spin a web of lies, I think we had a referendum on whether people believe the lies that come from the other side. I think we had that in November,” Daudt said. “And folks decided to place their trust in the Republicans who have brought common sense back to the Capitol in St. Paul.”
The difference depends on how the two-year budget is viewed. Under current law, education costs were already set to rise by $845 million, and Republicans are adding additional money to that projected increase to come to $1.1 billion in new total spending.
Senate Republicans are pursuing $900 million in tax cuts, including a reduction in the bottom income tax rate that would affect most taxpayers.
The House Republican plan pushes the money out differently. Farmers would pay less in property taxes because they would be exempt from some school levy costs. All businesses would enjoy property tax cuts because the bill excludes the first $200,000 in a parcel’s value from a state tax. There are also new breaks related to the estate tax.
College graduates with loans and parents saving for college would see new deductions. And Social Security recipients wouldn’t have as much of their monthly check subject to the income tax.
Both Republican-crafted versions exceed what DFL Gov. Mark Dayton recommended in a tax plan. He laid out a $300 million plan in January, but that also counts increased aid payments to local governments as tax relief on the notion that it would assist cities and counties in holding down property taxes.
Revenue Commissioner Cynthia Bauerly told a Senate committee on Thursday that expanded working family tax credits and child care dependent credits were vital to Dayton. She urged legislators to "continue the conversation" on those items and reconsider aspects of their bills that would have a greater financial impact years into the future. The last two years have ended without a signed tax package.
"The governor and lieutenant governor are committed to working toward a tax bill that is a component of an overall budget that maintains Minnesota's fiscally responsible financial state," Bauerly said.
House DFL Minority Leader Melissa Hortman of Brooklyn Park wouldn't say what size of a tax cut Democrats would be more comfortable with. She said a final tax plan must be weighed in concert with other state budget demands.
“There are definitely areas where we could work together,” Hortman said. “But this tax bill is so supersized. It’s way out of balance.”