GOP goes after Dayton tax plan; governor bites back

The only Minnesota tax proposal on the table so far came under fire Tuesday from legislative Republicans, who used a Revenue Department analysis to argue that taxpayers would suffer.

Republican majorities in the House and Senate criticized the plan from DFL Gov. Mark Dayton, which he released a month ago.

They fed off the administration's own analysis that assesses the plan's impact. Delivered to lawmakers Monday, the study finds potential tax increases at all income levels if the Legislature passed Dayton's proposed budget in its entirety. The analysis combines the effects of proposed tax cuts with the extension of a tax on medical services that was supposed to expire next year.

Rep. Pat Garofalo, R-Farmington, said the whole picture is what matters.

"Taxpayers don't have a tax bill pocket and a health and human services pocket," he said. "They've got one wallet and one purse."

Dayton has recommended keeping what's called the provider tax in place to head off a shortfall in a key health care fund. It's a 2 percent charge on medical services that is used to pay for health programs for lower-to-middle income people who are part of MinnesotaCare. The tax, which is assessed on providers but can be indirectly passed on to patients, is set to expire after Dec. 31, 2019.

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Revenue Commissioner Cynthia Bauerly told the House Taxes Committee that the continuation of an existing tax shouldn't be regarded as a tax increase.

"The extension of the provider tax will not result in Minnesotans paying a dollar more than they are paying today in taxes," she said.

Bauerly tried to draw attention back to more attractive features of Dayton's tax plan. They include breaks that could benefit small businesses and farmers as well as a new $60 per person tax credit. The credit, which the Dayton administration says would provide an average break of $117 for two million tax filers, wouldn't go to the highest earners.

The Legislature is under pressure to rework Minnesota's tax code because the federal government's tax overhaul would otherwise result in widespread state tax increases.

With only five weeks left in the session, Republicans have yet to outline their own proposal. But Republican leaders insist their plans in the works won't cause tax increases.

At a news conference Tuesday, Dayton argued for considering the medical tax and income tax proposals separately.

"I do know that it will cut state income taxes for over two million Minnesotans. I'm still waiting for their bills," Dayton said. "The time has passed for them to go play Whac-a-Mole with legislative proposals. The time is already past due for them to come forward with their bills. Then we'll have a chance to compare them with mine."