Bill that would cut $500M in taxes advances

Even though the latest state budget forecast doesn't come out until later today, Democrats in the Minnesota House are moving forward with tax cuts that will cost the state hundreds of millions of dollars.

The fast-moving House bill would make state tax law conform to recent federal changes. It would also repeal three business sales taxes that were passed last session.

Tax bills typically come together near the end of a session, but this $500 million package of tax cuts could be ready for a House floor vote next week after one more committee stop.

During a House tax committee hearing on the bill, chair Ann Lenczewski, DFL-Bloomington, explained the urgency.

"We're hurrying because the public is filing its taxes right now, and we need to get federal conformity taken care of right now," Lenczewski said. "And then we also are able, due to the situation we're in financially now, to address some of the business-to-business items, and we want to do those quickly as well."

House Republicans are also backing the bill. Rep. Greg Davids, R-Preston, echoed the need for quick action.

"I feel the need for speed. We need to get moving here. This is is in my mind is something we need to go at warp speed," Preston said. "I was kind of thinking of Star Trek, when Captain Kirk says to Scottie, 'Scottie give me more,' and Scottie says 'Captain, I can't give you more.' Well, we have to give them more."

The federal conformity changes would provide an estimated $200 million worth of deductions and exclusions. Those benefiting from the changes include married couples, low-income workers, some homeowners, people paying off college loans and people getting adoption assistance from their employer.

The repeal provisions are for business-to-business sales taxes passed last year on warehousing services, telecommunication purchases and business equipment repairs. The warehousing tax is scheduled to begin April 1, while the others kicked in last summer.

Edward Reynoso, political director for Teamsters Joint Council 32, joined with business owners to call for the repeal of the warehousing tax at a Senate hearing on the issue.

"At the end of the day, it is about profits. It is about our employers being plentiful in those profits to be able to provide good benefits and good wages for our members," Reynoso said.

DFL Governor Mark Dayton is calling for similar tax cuts by March 14, as long as the new economic forecast still shows a healthy budget surplus.

Senate Democrats, however, have not made the same commitment. Rep. Pat Garofalo, R-Farmington, warned his tax committee colleagues that their quick action might not matter.

"This issue, like many other issues, will be decided by the Senate Democrats. They aren't on the ballot this year. It's not going to be the House Republicans or the House Democrats or even the governor," Garofalo said. "The Senate Democrats are going to be in charge of this decision, and they're going to decide it for us whether we have an extensive debate or short term debate."

No tax bill votes have been scheduled in the Senate. DFL Senate Tax Chair Rod Skoe of Clearbrook said his committee is taking a slower approach than the House.

"The first thing that we're going to do in the Senate is wait for the forecast to come out, so we know exactly where we are," Skoe said. "I think we should have a really good understanding of where we're at and what the ramifications of that ongoing tax cuts and spending is."

Skoe said he remains interested in using a big share of the surplus to boost the state's budget reserve.