ST. PAUL, Minn. (AP) — The Minnesota Senate voted Friday to reduce and eventually eliminate the state’s property tax on businesses and to give an income tax break to married couples.
The GOP-assembled tax relief package passed on a party line vote of 34-26, with backers calling the business tax cut the best way to stimulate job creation. The House has already approved its own version of a business tax cut. Both proposals differ strongly from Gov. Mark Dayton’s job creation approach, setting up a standoff between the Democratic governor and Republican legislative majorities over the best way to improve Minnesota’s job climate.
Both Dayton and Republican legislative leaders have called job creation the top priority of the session. But Dayton has proposed a different approach, seeking a mix of bonded construction projects with a direct tax credit to businesses that make new hires. His proposal has not won favor with Republicans.
The tax bill the Senate passed Friday opts instead for general tax relief. It directs about $30 million to begin reducing the state’s general levy on commercial and industrial property, paid by every business property owner in the state. The bill’s sponsor, Sen. Julianne Ortman, said leaving that money in the hands of the business owners would allow them to not just hire new employees but also put money into their properties and keep money in their communities.
“It’s a good investment,” said Ortman, R-Chanhassen.
The Senate tax bill directs another $70 million to altering the state’s income tax to remove a penalty that hits married couples who jointly file. Together the tax relief would cost the state about $100 million in lost tax revenue. Ortman would cover that by cutting state administrative costs and dipping into budget reserves.
Dayton sent Ortman a letter Friday saying he would not support that approach, pointing out that the tax revenue gap would continue to grow in future years, creating bigger deficits in the state general fund.
“I cannot support changes in revenues this year, which would add to the next biennium’s expected deficit and compound the problems the Legislature and I will face next year and for the foreseeable future,” Dayton said.
While the governor said he supports property tax relief, he said he wants it distributed more widely than just to business owners. Senate Democrats blasted the tax bill as poor fiscal management.
“If we’ve learned anything from the past few years, it’s that you have to pay for the spending you want to do,” said Sen. Rod Skoe, DFL-Clearbrook. “You can’t just keep adding it on to future deficits.”
The House passed a tax bill earlier this month that also begins to reduce the business property tax, though the lost revenue is covered by a different approach. Ortman said she and the House Taxes Committee chairman have already started discussing ways to bring their bills into alignment, and that they would welcome members of Dayton’s administration to engage as well.
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