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House Passes Tax Bill Despite Dayton’s Objections

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ST. PAUL, Minn. (AP) — The Republican-controlled Minnesota House on Tuesday passed what its sponsor called a “smokin’ hot tax bill,” but the measure that would cost the state $52 million in lost taxes this year alone is likely to be vetoed by Democratic Gov. Mark Dayton.

Republicans who control the House and Senate call the bill’s centerpiece, property tax relief for Minnesota businesses, their top priority of the 2012 session. They held up other major bills in recent days, including the finance plan for a new Vikings stadium, as they suggested Dayton should agree to a deal that included the tax cuts and the stadium. But as stadium negotiations bogged down, that looked less likely.

The House approved the bill 73-57. The Senate, also controlled by Republicans, held off Tuesday night on an expected vote.

The bill includes $52 million in tax relief this fiscal year and $139 million during the next two-year budget. The legislation, which House sponsor Rep. Greg Davids, R-Preston, described as “smokin’ hot,” includes a freeze on business property taxes that Republicans say will free up capital that business owners can use to create jobs.

It also includes tax credits for certain research and development projects, and an investor tax credit meant to foster investment in startup companies. It creates an upfront sales tax exemption for businesses buying equipment that now have to apply for a rebate to get money back.

Rep. Glenn Gruenhagen, R-Glencoe, said the bill would lay “fertile ground” for businesses in Minnesota.

“Let’s grow the next Medtronic,” Gruenhagen said. “Let’s grow the next 3M.”

But Democrats said there was no guarantee businesses would use the tax breaks to create new jobs.

“This bill says that if you want to take your tax cut and buy a yacht, go ahead,” said Rep. Ann Lenczewski, DFL-Bloomington. “There is no accountability for this.”

Republicans planned to make up the loss in tax revenues by shifting $43.5 million from state budget reserves, a move Dayton and many Democrats said was irresponsible when the state faces a shortfall. The cost of the plan rises in the years to come, although Republicans argue that new economic activity would make up for the lost revenue.

“It’s smoking hot only because it’s going to be burning a hole in our state budget,” said Minority Leader Paul Thissen, DFL-Minneapolis.

Dayton said Tuesday morning that he had “significant differences” with the bill and thought a tax freeze for businesses was unfair when homeowners, renters, farmers and others are paying more.

“They’re all deserving of property tax relief,” Dayton said. “So to single out one group, the business community, and ignore the equal needs of other areas of the state I think is just ill-advised.”

Davids said that the tax committee worked to remove provisions the governor opposed, including a permanent phase-out of the state’s business property taxes. It also includes a tax credit of up to $3,000 for every veteran that businesses hire, an idea Dayton proposed earlier this year.

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

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