Tails tell the tale in the dispute over the Tax bill
The biggest hang up in end of session budget negotiations between Gov. Dayton and GOP legislative leaders is the Tax bill. Republicans have passed a conference committee report that provides a mix of business tax cuts (You can read more about the plan here). Democrats have proposed a counter offer to Republicans that would create $51 million in one-time tax cuts in the current budget cycle.
The debate over taxes highlights a debate over the best way to manage the state's fiscal policy over the short and long-term.
Democrats argue that passing the GOP Tax bill will only cause problems for the state's long-term budget future budget without any guarantee that the plan will create jobs in Minnesota.
"This is really giving hundreds of millions of dollars away to big corporations," DFL House Minority Leader Paul Thissen said.
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Republicans are arguing that their tax bill will end up paying for itself.
Rep. Greg Davids, R-Spring Valley, says the plan would give property tax relief for businesses across Minnesota.
"There's property tax relief in this bill for every business," Davids said. "From 3M to Big Bob's Eatery in Spring Valley."
The only problem is that the GOP plan would create a budget hole of $52 million in the current budget cycle and a $139 million hole in the next budget cycle. Since February, Dayton has said he won't support any tax cuts that aren't offset by another revenue increase. He's worried that the so-called tails from the GOP tax bill will create bigger budget problems in the future.
"I think taking $145 million as the current proposal proposes out of the next biennium and and adding that amount to the projected $1.1 billion deficit is fiscally unsound and unwise," Dayton said.
The problem for Republicans is that they aren't willing to find other revenue to pay for their tax cuts. Dayton has pushed to close so-called tax loopholes on corporations that operate overseas and to create the so-called Amazon tax that requires online retailers that don't have operations in Minnesota to pay sales tax on Minnesota-based purchases. Neither plan gained much traction in the GOP-controlled Legislature.
Instead, Republicans have decided to use the state's budget reserve to pay for the tax breaks in the current budget cycle and hope the state's financial picture improves enough that the tax break to businesses don't add to the projected deficit in the next budget cycle.
The difference in opinion is both financial and political. Republicans have argued that the state's financial picture is improving and point to an increase in tax collections over the past few months. Gov. Dayton has argued that the state's budget is already out of balance and adding another tax break will only exacerbate the problem. Davids, who chairs the House Tax Committee, said he believes his tax bill will encourage businesses to invest more money in their businesses.
"This tax bill will create more jobs than a bonding bill and a Vikings stadium combined," Davids said.
Dayton has argued that passing a public works bonding bill and a Vikings stadium will have a more immediate impact on the state's economy since there is high unemployment in the state's construction sector.
The other major issue of politics.
Republicans are also looking for a victory heading into November. Every member of the Legislature is on the ballot this year and the GOP talking points over the past two years have focused on cutting regulations and taxes. Dayton isn't on the ballot and has less urgency on the issue.
Republicans have yet to respond to the DFL offer. House and Senate officials say they intend to take up the GOP Tax bill on Tuesday.