A $2 billion tax cut package by Minnesota House Republicans includes $538 million for a one-time income tax exemption and $450 million to begin phasing-out the statewide business property tax.
The House GOP also proposed new tax breaks for Social Security income, military retirement pay, college loans and farm property. It would establish a new tax-exempt savings plan for long-term care and raise the threshold for estate taxes.
The package also calls for an $85 million cut in local government aid to Minneapolis, St. Paul and Duluth.
House Republicans say more than 2 million Minnesotans would see money back.
The new exemption could save a middle-class family of four more than $500 over the next two years, said House Majority Leader Joyce Peppin, R-Rogers.
House Republicans are trying to provide relief after the tax increases Democrats enacted two years ago.
But House Taxes Committee Chairman Greg Davids said it would have been pointless to propose rolling back the income tax increase on top earners that was DFL Gov. Mark Dayton's priority issue in 2013.
"I want to get a bill signed, and I don't think you start off by going after one of the governor's prime positions," said Davids, R-Preston.
The House GOP bill includes a $35 million expansion of the child care tax credit, far less than the $100 million the governor has proposed.
A spokesman for the governor said he was waiting for a Department of Revenue analysis of the House bill.
House Democrats quickly criticized the tax proposal. They contend the one-time exemption would provide minimal relief to lower income families.
House Minority Leader Paul Thissen, DFL-Minneapolis, said Republicans' push for $2 billion in tax cuts would result in teacher layoffs, college tuition increases and cuts in state-subsidized health care.
He also pointed out that the revenue loss from business property taxes and other changes will grow every year of the phase-outs.
"The massive tax giveaway is what's going to shortchange our kids and Minnesota's future, and this bill guarantees that Minnesotans will be back facing budget deficits and painful budget cuts in the near future," Thissen said. "If everything that's in this bill were phased in this year, you'd see a $2 billion deficit showing up this year."
The House tax committee is expected to vote on the bill Wednesday. The full House could vote next week.
Senate Democrats are preparing a $460 million tax bill that focuses on property tax relief and tax breaks aimed at getting jobs for veterans. They plan to vote on all of their budget bills, including the tax bill, by the end of the month.
The long-term cost of the House bill is problematic, said Senate Taxes Committee Chairman Rod Skoe, DFL-Clearbrook.
DFL senators, he said, did not want to repeat what happened in the early 2000s when the Legislature and then-Gov. Jesse Ventura passed "unsustainable tax cuts that caused us really to go into a deficit for a number of years. We're going to be very careful with regard to the out-years costs of these bills."
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