Senate Tax Chair Says Tax Breaks Same As Spending

ST. PAUL, Minn. (AP) — The Republican chairwoman of the state Senate Taxes Committee said Wednesday that exemptions to the state’s sales, income, property and corporate taxes are a form of government spending, and that closing some could be a part of GOP efforts to eliminate the state’s $6 billion budget shortfall.

Sen. Julianne Ortman, R-Chanhassen, made her comments after the Minnesota Department of Revenue released a report detailing tax breaks that riddle the state’s tax code. Some of the most widely known are popular sales tax exemptions on clothing and food purchases, and the mortgage interest deduction to the individual income tax. There are hundreds more that together add up to billions in lost revenue to the state, from sales tax exemptions on a number of professional services to income tax breaks for working families, charitable deductions, child care and long-term care.

Ortman did not specify which tax breaks might be targeted but said she and fellow lawmakers will review that in the coming weeks. That could cause conflict among those statehouse Republicans who say eliminating tax breaks is the same as a tax increase, including Ortman’s House counterpart, House Taxes Committee Chairman Greg Davids.

Ortman said protecting special carve-outs that only benefit certain taxpayers forces overall tax rates higher.

“What we’re doing is forgoing revenue,” Ortman said. “We should be viewing each of these expenditures as a spending program, and we came here to review every single aspect of state spending.”

The Department of Revenue’s “Tax Expenditure Review Report” found that tax breaks escape the scrutiny applied to most state spending. That’s because direct spending requires legislative re-authorization every two years, while tax breaks once on the book are not subject to regular review. Few have fixed expiration dates.

The report found exemptions to the state’s individual income tax would, if closed, generate more than 50 percent more than the total revenue currently collected. Sales tax exemptions are proportionally even bigger: The total amount lost to sales tax breaks actually exceeds the amount of money generated by the tax.

“Yet tax expenditures have only rarely been part of an open discussion as to how Minnesota uses state resources,” the report said.

Sen. Roger Reinert, DFL-Duluth, has introduced a bill to set expiration dates for tax breaks and create a commission to review tax breaks for individual usefulness prior to their expiration dates.

At a hearing Wednesday of Ortman’s Taxes Committee, Reinert proposed adding to his bill that every time a tax break expires the overall tax rate should be correspondingly lowered. Senate Minority Leader Tom Bakk, DFL-Cook, suggested a better way to use the money collected from closing tax breaks would be to replenish the state budget’s rainy-day reserves.

Ortman said she sees merit in Reinert’s bill but hopes for a faster review of at least some tax breaks in order that closing some might help trim the budget shortfall. Ortman has previously said she wouldn’t support closing the sales tax breaks on clothing or food, and acknowledged that efforts to close just about any tax break is likely to run into opposition from some interest group.

But Ortman suggested that looking at tax breaks could be an easier sell than Gov. Mark Dayton’s proposal to hike income taxes on top earners, which has gotten a unanimously frosty reception from Republican lawmakers.

“I think there’s a lot of political will here to look at the whole picture, and not just the pieces we’ve traditionally looked at when we look at our budget,” Ortman said.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

  • Yeh Right

    Knowing the Repubs these will certainly hit those less able to pay and miss those with all the money. That’s how they operate.

    • Tom

      Yeh Right

      That is because the Republicans still believe that “taxes” are the answer too the problem. You can cut the tax rate to zero for the rich and that won’t bring the jobs back if the “demand” is not there.

  • M B

    “sales tax exemptions on clothing and food”

    Yeah, penalize the poor some more why don’t you? Seriously, what level of “I don’t care about the little people!” does it take to come up with this? Oh, it it’ll enable them to give more tax breaks to their rich constituents, how silly of me. How many of those Rich Person loopholes are they going to close? I’ll bet very dang few.

    I’m too young to be this bitter and jaded at greedy politicians, but they continue on with Business As Usual. One thing that I have to admit is that the revulsion and nausea at their behavior doesn’t have as bad an effect anymore.

  • Mike

    Wow! Some common ground found in both parties? Keep it up you guys and gals have a long way to go.

  • Joe

    How about putting sales tax on farm equipment? HUGE tax capacity there and these guys have the money. Or, is not $6.50 corn high enough?

  • Tom

    You keep hearing the Republicans say that taxing the “rich” will hurt job growth. That would be true if the Democrats were suggesting a tax on businesses but what they want too do is tax their personal income. What a “rich” person takes home and what their business makes are two seperate issues. A business person only combines the two if they realize that their business is not going too make the kind of profit that will allow them too take home the same amount of income that they had been making in previous years. So they decide too lay off a certain amount of people too make sure their income stays the same which the Republicans don’t seem to mind. But the Republicans can keep telling themselves that “taxes” are the root of the problem, but just because they keep telling themselves that doesn’t mean its true. They should look for solutions that will get us out this problem sooner and some of those solutions might not be popular with some rather than solutions that will get us out of the hole slower because those solutions are more popular.

  • MR Wake-Up Call

    Unreal, the twisted language of theft. Your money is better spent by us,the government.
    Taxes shouldn’t go towards illegal immigrants, stadiums, high state worker salaries.
    “We are over taxed and over-regulated, the founding fathers would be ashamed of us for what we are putting up with”- Ron Paul

  • Tom

    Mr. Wake Up Call

    If are money is spent better us then people wouldn’t be losing their homes at record pace, bankruptcy’s are up, and people put alot of stuff on their credit cards then realized after the fact they couldn’t afford the payments. So govt is at fault in some respect but so are some consumers.

  • Mike

    Question anyone? When the economy was booming in the 90’s and investments were good and pay was high and jobs were abundant, how many of you trashed teachers and other public employees when they got 1.5% raises per year?

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