Burned twice in the past by vetoes, tax chair ‘believin’ there’s hope this time

The last time Rep. Greg Davids (R-Preston) chaired the House Taxes Committee was in 2011-2012. He was on the frontlines of solving a $6 billion General Fund deficit, with the focus squarely on raising revenue and cutting programs. It took a government shutdown and special session to resolve the budgetary imbalance.

In the next election cycle, Republicans lost control of the House, and with the DFL once again in the House majority, Gov. Mark Dayton was able to enact a fourth-tier income tax.

Now that the pendulum has swung again, giving the Republicans control, Davids is back as tax chair. But this time the state’s projected $2 billion surplus and is producing lots of ideas for tax relief and speculation about the future of the fourth-tier rate.

There have been plenty of bills before the House Taxes Committee proposing tax credits and some greater program spending. Many have been held over for him to consider as he puts together an omnibus tax bill, which he hopes to have ready for review the second or third week of April.

Davids is well aware that the last time he sat in the chairman’s chair, Dayton made mincemeat of two omnibus tax bills. He says his goal is to get his bill signed: “No politics — just good policy.”

Session Daily recently spoke with Davids about the unique role the House Taxes Committee serves, his process for crafting an omnibus bill and what tax proposals it may contain. This is an edited transcript of that conversation.

[Watch the video]

Session Daily: Can you explain the function of the tax committee?

Rep. Greg Davids: The tax committee has two functions. They have a spending side – money that goes to local government aids, county program aid and things like that. Then we have the other side where we are going to be able to give tax relief to Minnesotans.

The tax committee is unique as it is the only committee that can raise money and so, a lot of people have a little more interest in it because of that. I chaired the committee in 2011 and 2012 when we had a $6.2 billion shortfall. So with a surplus right now, it is a much different committee than we had four years ago.

SD: It seems with the surplus that everyone is coming to the table looking for a break.

Davids: The tax committee has a $2 billion target for tax relief, and I have a whole lot of new friends right now, but when the tax bill comes out, I might lose a few friends.

It means that in the various areas that we can reduce the tax burden for middle class Minnesotans, we will. For instance, whether it would be phasing out the Social Security tax on senior citizens or to encourage military veterans to retire in Minnesota by phasing out taxes on their retirement pay as it is in other states. There’s another example — a bill is going through about 529 [college savings] plans – to give some relief to college students and their student loans. Those are some of the things we can do — property and commercial and industrial tax relief; conform with the feds on the estate tax — there’s a lot of good ideas out there.

SD: With all these requests, how will you whittle the bill down to $2 billion?

Davids: Well, you take this sharpened pencil and we start going through. When I shape the tax bill, it has to be a bill that will pass. I learned very well how to count as tax chair; I’ve learned to count to 68 to get a bill passed [in the House]; to six in the conference committee and one to get it past the governor. My goal is to put a tax bill together that the governor will sign.

SD: Who is the “we” that puts together the omnibus tax bill?

Davids: We are all working on the tax bill. Minnesotans are coming to the table. People come with their requests for the tax bill. I’ll include my vice chair [Rep. Steve] Drazkowski, some committee members, and from the Republican side, we will present it and the DFL will have plenty of opportunity to put amendments on what they think they want to do.

SD: So this bill will reflect the priorities of the caucus?

Davids: Speaker Daudt is a great speaker and gives his committee chairs a lot of latitude. … We also have to remember … that we have to be able to get the votes to get the tax bill passed.

SD: The last time you crafted a tax bill was in 2011 you termed it your “smokin’ hot tax bill.” But Gov. Dayton didn’t quite agree with you and it didn’t take him too long before he vetoed it. Then he turned right around and vetoed a slimmed down version of the bill. You said you want to craft a tax bill that’s going to get passed. How are you going to do that? What’s going to be in it that’s going to make it appeal to the Senate and the governor?

Davids: This is a beginning of a process. This isn’t done overnight. I understand this tax bill that I put forward won’t be 100 percent passed into law … but we have to put together a bill with what the House priorities are. We’ll get it passed off the House Floor, and we’ll go to conference committee, and I’ll be spending many, many hours with Sen Rod Skoe [chair of the Senate Taxes Committee] and we’ll be going through, line by line — the House tax bill and the Senate tax bill — and we’ll put together a bill.

SD: Some fear this is déjà vu, and the only way the spending differences will get resolved is during a special session and after a government shutdown.

Davids: I hope not. That will be up to the governor. We’ll give a very reasoned bill to the governor, and if he decides to shut it down again like he did in 2011, that’s up to him. One difference is the makeup of the Legislature. The Democrats in the Senate are all up for election next year, and, when you are facing a vote on the ballot, you tend to think a little more clear.

I’m not looking for a big standoff with the Senate. I’m looking what are your ideas, what can we agree on; what can we put together that will get signed by the governor. Now, there’ll be some bumps along the way, I understand how this place works; but let’s get our pencil sharp, and let’s go through the tax bill and see what we can put together. It will be a very bipartisan bill. We will go forward with a very serious proposition. I hope the Senate will take a good look at it and when the Senate comes up with their tax bill, I will be reading it line-by-line, and I’m not looking for things that we can argue about. … I’ll be looking for things that “Yeah, we can do that. That’s a good idea.”

SD: With many people’s proposals in your hands. Don’t you feel like you are King Davids sitting there?

Davids: With the Davids Dollars? I’m certainly not a king. When you see the tax bill, I think you will see that it is a very nonpolitical bill; you’re going to have DFL bills; you’re going to have some of the governor’s proposals included. I like the child care tax credit, for example. He does some things on the estate tax that are very, very good. We’re not going to be able to do everything.

In my perfect world, I’d get rid of the fourth tier that was put on in 2013. It’s very bad tax policy. There are those that say unless you do that you’re not serious. … That’s not the case at all. We have some bad tax policy, and that’s bad tax policy. … Why would I eliminate that knowing he’s not going to sign it? I’d like to skip the political part and get to the policy part right away. … Let’s cut to the chase and get a bill together that the governor can sign.

SD: What will you be calling this year’s tax bill?

Davids: The tax bill’s name: Don’t Stop Believin’ because hope is here. We have hope for the taxpayers of Minnesota that they are going to keep more of their hard-earned money. Government cannot continue to grow faster than middle class pocketbooks. And that’s what the tax bill will show. So don’t stop believin’.