Governor’s tax bill calls for $79 million in changes

Many provisions in the 2016 omnibus tax bill have resurfaced in HF893, Gov. Mark Dayton’s new tax proposal. Last year’s edition received overwhelming bipartisan support, but was vetoed by the governor because of a one-word error that could have cost the state millions.

Revenue Commissioner Cynthia Bauerly laid out measures contained in the 126-page document. She was proactive to head off calls for major tax cuts, explaining the bill is part of a larger budget picture that also includes investments in education and human services.

“We are now facing surpluses rather than deficits, and one of the governor’s commitments is ensuring a stable state budget going forward,” she said.

As is custom, the governor’s tax bill is sponsored by the committee chair, in this case it’s Rep. Greg Davids (R-Preston). The committee took no action and the review is expected to continue at a later date. While all tax bills must originate in the House, the companion, SF726, is sponsored by Sen. Roger Chamberlain (R-Lino Lakes) and awaits action by the Senate Taxes Committee.

The bill

Dayton proposes approximately $79 million in overall tax changes in the 2018-19 biennium, including $189 million in tax reductions and $105 million in tax increases.

It includes several modifications and expansions to existing tax credits:

• $93.2 million to expand the working family credit;
• $59.8 million for modifications to the child and dependent care credit; and
• $10 million more to fund the Angel Investment Tax Credit.

With commodity prices on the decline and land values on the rise, some farmers would see property tax relief. The governor proposes a credit worth $34 million to help farmers who carry a large share of the cost of school district bonding projects. It would also provide aid to farmers whose land is set aside in a buffer zone as they comply with new state water quality requirements.

Local and county governments would benefit from the bill. It calls for a $20 million increase per fiscal year in local government aid and $10 million for counties.

The bill also contains some local property tax exemptions, including one for the new St. Paul soccer stadium.

Commonly known as ‘tax loopholes’

Tax reform and measures aim to bring consistency to some tax provisions, Bauerly said.

Rep. Greg Davids

Davids said provisions would go a long way to clean up some business actions that circle the so-called loophole rim. “They are not right. They are being abused … we need reform.”

Rep. Paul Marquart (DFL-Dilworth) reminded Davids that the proposed reforms are revenue raisers, something Republicans traditionally oppose. New tax compliance measures would bring in approximately $80 million.

“If in fact you have businesses using the law for unintended benefits … then others are paying more,” Marquart said. “Businesses around the state should know there are certain unintended benefits that some are able to take advantage of.”

2016 Heartburn

Republican members expressed disappointment over last year’s vetoed tax bill, and the inability of legislative leaders and governor to reach agreement and deal with the bill during a special session.

“It was extremely disappointing to have a bill pass overwhelmingly and get hung up over some typos. … This is something that could have provide tens of thousands of people with relief,” said Rep Jenifer Loon (R-Eden Prairie).

Marquart said there is plenty of blame to go around for what happened in 2016.

“Let’s move on. Let’s stop the blame game. A lot of people were inconvenienced because we didn’t get these things done. … I’ve just heard from folks back home, ‘Just get things done,’” he said.