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Minn.’s Dayton Pits Tax Credit Vs. Corporate Tax

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(credit: Hannah Foslien/Getty Images)

(credit: Hannah Foslien/Getty Images)

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ST. PAUL, Minn. (AP) — Gov. Mark Dayton on Monday proposed exchanging part of a tax break for overseas businesses for one for companies that hire veterans, students or the currently unemployed in Minnesota.

The tax break-for-tax break swap is the cornerstone of a supplemental budget the Democratic governor plans to send to the GOP-controlled Legislature. It is modest in scope, containing roughly $60 million in changes to a multibillion-dollar budget. Other features include reversing some health program cuts made a year ago and replenishing accounts that pay for police body armor and military honor guards.

Dayton’s main proposal is reducing the state tax exemption for certain foreign royalties and income from 80 percent to 62 percent initially and an even smaller percentage down the road. The change would generate $40 million if enacted this year and more in years to come.

The bulk of the new money would offset a tax credit Dayton put on the table months ago. It would give companies a $3,000 credit for each new hire in Minnesota this year and $1,500 through June 2013, so long as the employees stay on the job for at least a year.

“It’s just a question of whether the priority is the people of Minnesota, which is mine, or the foreign operating corporations, which may be somebody else’s,” Dayton said.

Republicans have long resisted changing the foreign corporate tax exemption, arguing it would be a hardship on businesses and dampen reinvestment of profits.

Lawmakers set the state’s two-year budget last year, and technically don’t have to adjust it. A standoff wouldn’t result in a shutdown as it did last summer.

The supplemental budget also would reinstate coverage for dialysis treatment and cancer treatment that was reduced last year in public health insurance programs for the poor. Human Services Commissioner Lucinda Jesson said the administration was concerned providers would scale back on care if they saw that and reimbursements for other services fall too much.

A second tax change in Dayton’s plan has some support within GOP ranks. It would allow the state to collect tax on items purchased over the Internet that are used and consumed in the state. Some big retailers argue online sellers have an unfair advantage because their goods aren’t subject to taxes if they don’t have a physical presence in the state.

The budget plan also contains fee changes for hunting and fishing, with the proceeds plowed back into natural resources programs. One of them is a new wolf hunting license that would be sold for $50 for residents and $230 for nonresidents. Officials say the new licenses are part of a broad wolf management strategy.

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

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