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Dayton-GOP Alliance On Jobs Bogs Down In Details

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(credit: Hannah Foslien/Getty Images)

(credit: Hannah Foslien/Getty Images)

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ST. PAUL, Minn. (AP) — Democratic Gov. Mark Dayton says his top priority for the legislative session already past the half-way point is creating jobs. The Republicans who control the state House and Senate say jobs are their priority, too.

But at the Capitol, sharing good intentions has rarely guaranteed results.

Dayton has repeatedly called for a bipartisan jobs package, one that “takes your best ideas and my best ideas and turn them into jobs,” as he put it in his State of the State speech.

Dayton’s well-aired proposal resembles a stimulus approach, with three major prongs: a $775 million bonding bill, a proposal to build a new Vikings stadium and a $3,000-per-hire tax credit for any Minnesotabusiness that hires an unemployed person, a veteran or a recent college graduate. The administration, citing national studies, contends the two construction measures would produce thousands of jobs — on work sites, for materials suppliers and at places where people doing the building will ultimately spend their paychecks.

None of Dayton’s proposals has caught fire with legislative Republicans, who are dubious the number of jobs promised — particularly by the tax credit — would materialize. Instead, they favor aiding businesses with a mix of tax cuts and elimination of regulations — with the centerpiece proposal to reduce and eventually eliminate a tax that the state levies on every commercial property.

“I applaud the governor coming forward and realizing we need a better business climate to create jobs. But I don’t think his jobs package actually creates any,” said Rep. Greg Davids, R-Preston, who chairs the House Taxes Committee. The business property tax phase-out “does, because it leaves actual money in the hands of every business owner. It sends a message that we’re serious about wanting you here, businesses. We want you here and hiring people.”

Davids and the Senate Taxes Committee chairwoman, Sen. Julianne Ortman, are leading the phase-out charge; both call it their top priority of the legislative session. Their dual proposals differ in some details, but under both plans the business property tax would disappear within the next decade or so.

For a vet clinic in Scandia, the savings would be about $2,900 a year. But for a major manufacturer like Andersen Windows, it would mean a more than $70,000 break on its corporate headquarters alone, if the state property tax it was due to pay in 2012 was wiped out.

The tax now generates $880 million a year for the state. The proposals would draw it down slowly year by year, so the blow to the state treasury could be handled in stages.

The business property levy is one of the state’s newest taxes. It dates only to 2001, when then-Gov. Jesse Ventura and state lawmakers approved it as part of a broader plan shifting more of the public school funding burden from city and county property taxes to the state. The tax contains a built-in, automatic increase, and has gone in that time from collecting $540 million a year to the current $880 million.

Business property owners also pay local property taxes, but the state portion now averages about 30 percent of their total yearly property tax bills, Ortman said.

“That’s a huge amount of money being taken out of our economy and handed to government,” said Ortman, R-Chanhassen. “The goal is to let them keep more of this money, reduce their fixed costs and make them more likely to reinvest in higher wages, new jobs, capital improvements and equipment.”

Absent from the GOP proposals are any guarantees that Minnesotabusinesses would hire more people in return. Rep. Ann Lenczewski, DFL-Bloomington, was skeptical they would.

“This is like throwing money out of an airplane,” said Lenczewski, who chaired the House Taxes Committee when Democrats controlled the House. “You’re flying over the state and throwing money at all the businesses and shouting, ‘Hey, somebody please create a job down there!'”

Also uncertain is how to pay for what would be an eventual $1.6 billion hole in the state’s two-year budget. To cover the initial costs, likely a $50 million to $60 million drawdown, Davids first proposed eliminating a state tax credit that benefits renters. That met with fierce opposition, so Davids is now eyeing a slice of a recently announced state budget surplus.

The Dayton administration has declared that money off-limits while the state replenishes its budget reserves and starts to settle debt it has with schools. But Davids said everything is negotiable. “We’re the Legislature, we can do what we want,” he said.

Ortman said she would seek to cover at least the initial cost of phasing out the tax by reducing the size of the state workforce. “We had 22,000 unessential employees during the government shutdown, that to me says we can achieve some savings,” she said.

State Revenue Commissioner Myron Frans said even if Republicans identified a temporary replacement, Dayton would never support opening up a budget hole that would grow bigger year over year. Frans is working on a comprehensive tax proposal that he said Dayton would push in the 2013 session.

“The governor is obviously open to tax relief, but would want to approach it in a way that benefits all taxpayers — not just businesses,” Frans said.

Dayton proposes paying for his tax credit for job creation by closing a set of tax loopholes that benefit state corporations with foreign subsidiaries — a move Republicans oppose.

He has also recommended applying the state sales tax to purchases made over the Internet, which Davids is at least open to.

Whether any side gets any of what they want could come down to everyone getting something.

“The governor never says never,” Frans said of the possibility of Dayton accepting some items on the Republican wish-list. “The key is coming up with ways to enhance jobs, with a way to pay for it now.”

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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