ST. PAUL, Minn. (AP) — Minnesota residents hanging onto their tax returns until state government decides on new breaks could get a verdict from lawmakers before the weekend.
After their start-and-stop debate provoked a rebuke this week from Democratic Gov. Mark Dayton, the Legislature set the stage Wednesday for final ratification of extra deductions and exemptions bound for at least 300,000 people that can be claimed in the current income tax filing season.
The Senate unveiled a proposal with $434 million in tax relief that would also sock away $150 million in a state rainy-day reserve. Democratic leaders said they hoped to bring to a vote Thursday, which would leave it to the Democratic-led House to give final consent or head briefly to the negotiating table. The House previously backed a bill with more short-term tax breaks for individuals and businesses.
Among the recipients would be those eligible for working family credits, recent college graduates paying off loans and people receiving certain tuition allowances. The universe expands greatly next year, when 650,000 married couples would qualify for greater deductions.
A substantial amount of money is also being used to shut off new sales taxes on business transactions, such as equipment repair and warehousing rent, that lawmakers imposed just last year while balancing the state budget. Unlike the House version, the Senate proposal doesn’t give refunds to businesses for sales taxes they have already paid under the recent tax expansion.
Helped by a stronger economy and last year’s tax increases, the state is on course for a $1.2 billion surplus by summer of 2015.
Republicans said they backed the tax breaks that were in the plan but argued they didn’t go far enough.
“We would like to know, Minnesotans would like to know, where’s the rest?” said Sen. Julianne Ortman, R-Chanhassen.
Senate Taxes Committee Chairman Rod Skoe, DFL-Clearbrook, said lawmakers want to be prudent about the surplus, which is based on projections rather than actual revenue.
“We are in the best financial shape we’ve been in since 1999,” Skoe said, before describing a tax-cut frenzy in the following years that he believes helped sink the state into deficits. “Really we don’t want to go through that again. So I think a little caution is in order.”
That caution is reflected in a provision in the bill to add the state’s roughly $1 billion in has in reserve, a position that isn’t part of the House tax plan.
For the Senate to pass it Thursday, Republicans would have to agree to suspend rules that would normally require the bill to wait an extra day. The inclusion of more money for the reserve could be a sticking point, both among Republicans who worry about the state stockpiling too much money and among House Democrats who haven’t extensively debated the issue yet.
House Speaker Paul Thissen, DFL-Minneapolis, said his members won’t commit to endorsing the Senate proposal before analyzing it more closely.
Dayton administration officials want a deal done this week so they can promptly update filing systems and software in time for the usual post-April 1 filing crush when more than 1 million returns come in.
Revenue Commissioner Myron Frans told reporters that time is off the essence.
“We will work day and night, 24-7 to implement these changes if they become law,” Frans said.
For the 59 percent of taxpayers who have already submitted returns, Frans said those eligible for new credits would either be notified by the agency about submitting an amended return or automatically receive an updated refund. He said 300,000 to 500,000 filers could be eligible for one or more new deductions.
Even if this bill becomes law, there is much more of the state’s surplus to designate.
As the session moves along, Senate GOP members said they would push to chop a half-penny off sales taxes collected at the cash register start this summer. That would take the rate from 6.875 percent to 6.375 percent. The cut would cost about $362 million in its first year.
“The sales tax affects everybody,” said Senate Minority Leader David Hann, R-Eden Prairie. “Anybody who goes to Target, anybody who goes to Best Buy, anybody in the state. It will be a reduction of expenses to every single person in the state.”
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