ST. PAUL, Minn. (AP) — The Minnesota House on Wednesday passed a Republican-sponsored bill to reduce and ultimately eliminate state property taxes on businesses, but Democrats criticized the measure for shifting money away from a tax credit for renters.
The House passed what Republicans call the “tax relief and job creation act” on a 72-62 party line vote. Its centerpiece is a one-year freeze on a state-imposed property tax, paid by businesses and corporations, followed by a permanent phase-out over 12 years that would begin in 2014.
“It encourages businesses to stay here, expand here, to move their operations here and create more jobs,” said Rep. Bob Gunther, R-Fairmont. “It declares to job creators around the country that Minnesota is open for business.”
The tax, properly known as the commercial/industrial tax, now raises about $880 million a year for the state. To cover expenses lost from eliminating the tax, Republicans proposed a reduction in the size of a state credit that renters receive for the portion of their rent that covers the building owner’s property tax.
Democrats called that a clear case of shifting tax policy in a way that harms the poor and middle class in favor of the wealthy.
“This is not Minnesota nice, when you are placing a much higher priority on wealthy corporations over our senior citizens and our middle-class families. That is extreme,” said Rep. Paul Marquart, DFL-Dilworth.
Marquart said about 30 percent of the roughly 300,000 people who qualify for the credit — a renter currently must earn less than $55,000 a year to get it — are senior citizens or disabled people. He said the average senior citizen would lose about $100 a year. Under the legislation, seniors and the disabled who make less than $40,000 a year will be eligible; everyone else will have to make less than $25,000 a year to get it.
Republicans in both the House and Senate have pushed to eliminate the business property tax as the best way to improve the state’s job climate. Republicans share the emphasis on creating new jobs with Democratic Gov. Mark Dayton, who has proposed a $3,000 per-hire tax credit for every Minnesota business that hires a currently unemployed person, a military veteran or a college student.
Dayton’s proposal did not make it into the House tax bill under debate Wednesday. Neither did a Senate version that was unveiled earlier in the day.
Like the House Republicans’ bill, the signature item in the Senate bill is the business property tax phase-out by 2026. The bill’s author, Sen. Julianne Ortman, said it would make it easier for companies to hire more people.
“It should be an urgent issue,” said Ortman, R-Chanhassen.
The Senate bill also contains relief for married couples on their 2012 income taxes. It does not reduce the renter’s credit, which Ortman has said she does not support. Instead, it aims to make up the difference in unspecified cuts to state agencies.
Both Ortman and the House Taxes Committee chairman, Rep. Greg Davids, have said they are open to negotiating a tax relief and jobs bill with Dayton. But Dayton has been cool to the idea of eliminating the business property tax, saying it should be part of a larger package that also aims to reduce property taxes on homes.
The House tax package also increases a research and development tax credit, provides a sales tax exemption for businesses with fewer than 20 employees, and extends a tax credit of up to $14,400 for employers who hire veterans who are disabled, unemployed or on food stamps.
Republicans said the business property tax makes Minnesota’s tax burden on businesses among the country’s highest, while the state’s residential property tax rates are more in line with other states.
But Rep. Ann Lenczewski, DFL-Bloomington, criticized the tax elimination as an ineffective way to create jobs.
“You don’t have to create a job to get any money here,” Lenczewski said. “You just get it.”
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