Minnesota House moves quickly to pass tax breaks
(AP) A fast-tracked bill that provides tax breaks linked to college costs, classroom supply purchases and military combat pay unanimously passed the Minnesota House on Thursday and could wind up on Gov. Tim Pawlenty's desk next week.
Lawmakers are rushing to align Minnesota's tax code with recent changes Congress made to federal guidelines. The goal is to get it done before the window opens for filing 2006 returns so Minnesotans eligible for the targeted deductions can claim them without filing extra paperwork.
House Majority Leader Tony Sertich, DFL-Chisholm, trumpeted the measure's swift passage as a positive tone-setter for the session.
"Twenty four million dollars of tax relief is not chump change," he said.
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Despite the one-sided vote, passage didn't come without hiccups. Minority Republicans tried repeatedly to add more tax exemptions and a general income tax cut, putting newly empowered Democrats in the uncomfortable spot of rejecting hundreds of millions of dollars in tax relief.
It signaled a brewing battle over the larger task of carving up a projected $2.2 billion surplus.
Under the bill:
- An estimated 111,000 Minnesotans would be able to deduct up to $4,000 in college tuition costs and related expenses from their income taxes, resulting in a net savings of $165.
- More than 53,000 teachers would be eligible for an up to $250 deduction for classroom supplies they purchase, reaping an average tax benefit of $20.
- Military personnel would get permission to put tax-exempt combat pay into retirement accounts without penalty.
The DFL-led Senate hopes to vote on the bill next week, and Pawlenty has pledged his signature.
Democrats said they'll consider more comprehensive tax packages later this session, with the focus on easing rapidly rising property taxes.
House and Senate Republicans, meanwhile, are making no secret of their planned push for income tax cuts.
One unsuccesful amendment to Thursday's bill would have cut the rate on the lowest income tax bracket by a half percentage point, reducing it to 4.85 percent.
"We're not talking about tax cuts for the rich," said House Minority Leader Marty Seifert, R-Marshall. "We're talking about the bottom rate. We're talking about the coupon cutters in every district in the state."
Democrats criticized the move as posturing meant to force them into difficult votes. "So starts the food fight," Sertich said.
Senate Republicans said at a morning news conference that they want a cut in the middle bracket, reducing it from 7.05 percent to 6.55 percent. The reduction would affect 43 percent of the 2.63 million filers in Minnesota and cost the treasury $466 million, said Sen. Julianne Ortman, R-Chanhassen.
Senate Tax Committee Chairman Tom Bakk, DFL-Cook, downplayed the chances for income tax cuts, saying he and fellow Democrats have other designs on the surplus.
"The public expects us to spend some of the money on health care and they expect us to spend some money on schools and early childhood," he said.
