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Minnesota GOP rolls out $2 billion tax-cut plan

Rep. Paul Marquart of Dilworth, watched by House Democatic Leader Paul Thissen of Minneapolis, tells reporters Monday, April 20, 2015, that a Minnesota Repubilcan tax proposal would hurt Local Government Aid that cities recieve. (Forum News Service photo by Don Davis)

ST. PAUL — Minnesotans deserve a $2 billion tax break, House Republicans say, while admitting they will not get their way.

A plan the GOP laid out Monday features a provision to give Minnesotans $539 million in income tax cuts with another $453 million for beginning to phase out the statewide business and cabin property tax. The bill is expected to be in front of the full House in coming days, as lawmakers have less than a month to pass and then negotiate their final budget and tax bills.

The proposal contains a wide variety of tax cuts, including $131 million in credits for student loans, $61 million for farmers and other Minnesotans by reducing the state estate tax, $50 million to farmers by reducing their share of school district construction costs and $101 million to encourage businesses to increase research and development.

"State government has collected $2 billion too much from Minnesotans," House Speaker Kurt Daudt, R-Crown, declared as he and other GOP leaders announced their tax package.

Republicans did not touch the new tax Democrats added two years ago on the richest Minnesotans when they were in charge of the House, Senate and governor's office. House Tax Chairman Greg Davids, R-Preston, said he knows Dayton, a Democrat, will not approve eliminating that tax, so he opted for tax cuts he thought would be more acceptable.

While Dayton's spokesman said he is awaiting a Revenue Department analysis before commenting on the plan, House Democrats wasted no time attacking it.

House Minority Leader Paul Thissen, D-Minneapolis, said Republicans are misleading Minnesotans by saying their bill aims to help the middle class. He said it really helps big businesses.

The income tax relief could provide up to $1,500 a year in tax savings for a family of four, Republicans say. Thissen, however, said an average-wage single tax filer would more likely get $50 to $70 a year.

The income tax change would last two years, while the statewide property tax phase out would come over a number of years.

Republicans say that the Twin Cities' tax relief for next year would be $110 million from the property tax change, with greater Minnesota getting $132 million. Greater Minnesota would get far more relief for cabins, officially known as season recreational properties: $30 million vs. $860,000 for the Twin Cities metro area.

Rep. Steve Drazkowski, R-Mazeppa, said that eventually eliminating the statewide property tax (local property taxes would not be affected) would allow "our small business owners to survive and, hopefully, thrive."

Aitkin County Commissioner Donald Niemi agreed with Drazkowski that the Republican plan could help small businesses. For one restaurant in his area, Niemi said, 400 pies must be sold to pay for the state property tax.

With stores closing across Minnesota, the commissioner said, any help like the phase-out helps.

Thissen agreed that at first small businesses may do well under the bill, but said as the phase-out continues the benefit would shift to big businesses and to the Twin Cities.

Davids claimed that 75 percent of the GOP bill is "targeted to the middle class and actual Minnesotans, not businesses."

"I wanted to bring as many people into tax relief as I possibly could," he said, adding that even though he hoped for Democratic support for some provisions, he knows the bill cannot pass as is.

Thissen compared the overall tax plan to a time in the early 2000s when Jesse Ventura was governor and rebate checks were sent to Minnesotans. Soon after the "Jesse checks" were sent, the economy went sour and the state budget faced numerous problems.

Dilworth Democratic Rep. Paul Marquart, an assistant minority leader, said he fears an $85 million cut to Local Government Aid to Duluth, St. Paul and Minneapolis also would hurt other cities.

Democrats brought several Minnesotans to a news conference who said they would be harmed by the overall Republican budget.

Nancy Swanson, a server at the Green Mill restaurant in Willmar, said a bill up in the full House on Wednesday would affect her income. The provision would lower the minimum wage for some people who receive tips.

Swanson, married with four children, said that she does her best to serve customers, and in return they "give us nice tips. I'm going to be penalized for a job well done."

The Republican tax bill also includes:

• $50 million for Minnesotans who pay more using MNsure than their previous health insurance providers.

• $47 million for families with children by increasing education deduction.

• $35 million for families by establishing a larger child care tax credit.

• $21 million by repealing sales tax on digital products such as downloaded songs.

• $20 million for pre-kindergarten student deductions.

• $40 million to let families deduct contributions to Minnesota College Savings Plan.

• $237 million to phase out tax of Social Security payments.

• $52 million to eliminate income tax on military pay and pensions.

• $10 million to provide tax credit for saving for long-term care costs.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.