Senate passes tax cuts, sets stage for talks with House

The Minnesota Senate passed a bill Monday that cuts taxes for businesses that hire veterans, reduces business property taxes, and directs more state aid to cities and counties.

Three Republicans joined all 39 Senate Democrats to vote for the bill. The vote was 42-25.

Senate Tax Chair Rod Skoe, DFL-Clearbrook, said the key provision in the bill is a $2,500 tax credit for employers who hire veterans.

"We think it's important to address the needs of those folks," Skoe said. "The best way to address the housing and mental health needs of these folks is to find a way to get them a job."

The bill would also speed up an aid payment to local governments and provide property tax relief for homeowners and businesses. It would also increase state aid to cities and counties.

Republicans said the bill doesn't cut taxes enough.

Sen. Julianne Ortman, R-Chanhassen, complained that Senate Democrats are using just a tenth of the state's nearly $2 billion budget surplus for direct taxpayer relief.

"We have more revenues at the Capitol than we can justify," Ortman said. "This bill doesn't do anything to relive the tax burdens of Minnesotans or to make Minnesota more competitive in terms of its business climate or its tax climate."

Ortman noted that Senate Democrats also passed a bill that increases the gas tax and a metrowide sales tax to pay for transportation projects.

Senate Democrats will now have to negotiate with House Republicans who passed $2 billion in tax cuts and Gov. Dayton who proposed fewer tax cuts than the Senate.

For the past month, Dayton has criticized Republican leaders in the house for proposing the tax cuts while proposing little spending on education and other initiatives. He continued that criticism Monday.

"To turn away from all of those opportunities for tax giveaways, especially when they're targeted for the wealthier citizens of the state and the business community, it's just unconscionable," Dayton said.

Dayton's ire largely focused on Republican plans to phase out a statewide business property tax and a repeal of the estate tax -- two initiatives that he said will cause budget problems for the state in the future.

But Dayton is signaling some areas where he could compromise with Republicans. One is the two-year income tax break in the GOP bill.

"I probably shouldn't say this because it will ruin its chances, but it would be the individual tax relief that would be directed to all income brackets," the governor said. "But it's going to be directed to lower and middle income Minnesotans and it's for two years."

Dayton said because the income tax break is temporary, it would be unlikely to cause future budget problems.

The governor also said he would be willing to lift a $25,000 ceiling on the amount of Social Security income that's exempt from Minnesota taxes. That would help some, but not all seniors who rely on Social Security.

Republicans have proposed phasing out the entire tax on Social Security income. They also want to exempt retirement income for veterans.

"I'm very happy that the governor is warming up to a few of our provisions," said state Rep. Greg Davids, chair of the House tax committee. He's pleased Dayton appears to be open to some of his ideas.

Davids, who has acknowledged his $2 billion tax cut plan isn't going to become law, said he crafted his tax bill to include Dayton’s top tax measures -- including expanding the state's child care tax credit.

"I went through and picked out as many things out of the governor's bill as I could that made sense, and those are in the bill," said Davids, R-Preston. "I need to get a bill signed by the governor, and I didn't see where trying to repeal the 4th tier from two years ago or things like that. I don't see how that moves the bill forward."

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