Democrats in the Minnesota Senate released a $434 million tax relief measure today that falls short of Gov. Mark Dayton's goal of cutting taxes by $616 million.
The Senate bill, which DFL leaders hope to pass Thursday, also is $69 million smaller than a similar measure passed by the House two weeks ago.
• Related: Dayton hammers Senate on tax vote delay
Still, it would provide hundreds of thousands of Minnesotans with immediate benefits, if lawmakers can resolve their differences quickly.
The tax cuts in the Senate bill come from aligning Minnesota's tax code with the federal code on various credits and deductions, changes that would benefit married couples, homeowners, college loan payers and others. It also would repeal three new business sales taxes passed last session on equipment repair, telecommunication equipment and warehousing.
But unlike the $503 million bill in the House, the Senate would not make the repeal of the equipment repair and telecommunication equipment taxes retroactive to last summer, when the state implemented them.
The Senate tax cuts amount to less than half of the $1.2 billion budget surplus lawmakers have to work with this session. But Senate Tax Chair Rod Skoe said the bill is fiscally responsible.
"We are in the best financial shape that we've been in since 1999," said Skoe, DFL-Clearbrook. "In the 2000-2001 legislative session there was a lot of hoo-rah about giving it all back. We went through a decade now of deficits and unallotments and goodness knows what, and we don't want to do that again. So, I think a little caution is in order."
The Senate bill includes a repeal of the gift tax, an estate tax adjustment and an angel investment tax credit. However, it does not include a child care credit, one of Dayton's priorities.
The biggest difference between the House and Senate bills is that the Senate's measure uses $150 million of the surplus to increase the state's budget reserve account. Skoe said the money will help if there's an economic downturn.
"Some of the recommendations that come out of some of the credit agencies is that the reserve level should actually be significantly higher than the recommendation that we're coming forward with," he said. "We think it's a pretty modest, conservative approach to it."
Senate Republicans said the DFL bill doesn't go far enough to correct what they view as "overtaxing." They want additional tax cuts, including a permanent half-cent cut in the sales tax that would cost $362 million a year.
Senate Minority Leader David Hann said a sales tax cut would benefit everyone.
"We're better off letting people keep their money in their pockets," said Hann, R-Eden Prairie. "The ability of ordinary people to spend their own money — that makes more sense to us than having it come to St. Paul and be put away into an account for deferred spending at some later date. We should not do that. We should not collect that money."
Senate DFL leaders need Republican assistance to waive the rules for a vote on the bill the same day it comes out of the tax committee. Hann said he had not yet made a commitment to provide that help.
The rollout of the bill came a day after Dayton criticized the Senate for not moving faster on taxes. The governor wanted the measure finalized this week to benefit Minnesotans who have not yet filed their tax returns.
State Revenue Commissioner, Myron Frans said at least 300,000 filers will be eligible for one or more of the proposed tax breaks. Frans said every day is critical for his department.
"We will work day and night, 24/7 to implement these changes once we get the law, and we have people ready to go," he said. "We just have to have the law. So, I'm concerned. But I think we have a lot of talented people at the Department of Revenue, and our systems work really well."
House DFL leaders were generally unwilling to critique the Senate bill. House Tax Chair Ann Lenczewski said she needed some time to study parts of the proposal.
"We just don't know what they're doing yet," said Lenczewski, DFL-Bloomington. "I mean we have a spreadsheet, but we have to actually see — and then they're going to mark up the bill, right? I mean they're going to add amendments, things are going to move around. So I think it's just way too soon to know exactly how much we even differ with them at this point."
If the Senate passes its tax bill Thursday, the House would then have to decide whether to accept that version or send it on to a conference committee to work out differences between the two bills.