At Issue: Dealing with difficult reform

Reform has been the major theme throughout session in the House Taxes Committee, but it doesn’t come easy.

“Reform is hard. It’s not popular, and we understand that,” said Rep. Ann Lenczewski (DFL-Bloomington), House Taxes Committee chairwoman, during the April 25 floor debate on the omnibus tax bill. “It is not right in my mind that those who are in the best financial situation in this state continue to pay less as a percentage of their income than everyone else. I am not fine with sitting here with this embedded unfairness in the tax code and ignoring it. And I don’t think the members of the majority are OK with that.”

After more than five hours of debate, HF2323*/SF2074 was amended to include the House language and passed 68-65. The Senate, which passed its version 35-31 April 24, refused to concur. A conference committee was scheduled to begin its work April 30 on merging the bills.

The House bill would increase the cigarette tax by 54 cents a pack, the liquor tax would rise for the first time since 1987 and top income-earners would be subject to a new 9 percent income tax rate under the $1.5 billion tax bill. It also would eliminate many tax deductions, close corporate loopholes and convert the state’s mortgage interest deduction into a credit so that all taxpayers qualify for an equal percentage of tax benefit.

“President Reagan did what we’re trying to do here,” Lenczewski said. “We were charged with really, truly as people said, zero-based budgeting. Turning over every rock, making the tough choices, scrutinizing everything and this committee did.”

Some members accused the bill of going after everyone in the state.

“You say this is a more progressive bill, but I disagree with that,” said Rep. Laura Brod (R-New Prague), lead Republican on the House Taxes Committee. “Who will actually be hit by the tax increases in this bill? I notice that there are tax increases to pretty much everybody.”

Several amendments were offered to the bill, but none by Republicans, which Brod said was because there were too many provisions to fix.

“This bill hurts jobs, it hurts families and it’s the wrong direction to go,” she said. “This bill will put additional burden on those folks struggling so hard already to make ends meet.”

Rep. Paul Marquart (DFL-Dilworth), House Property and Local Sales Tax Division chairman, said the bill lays the groundwork for a good economic future.

“This reform was not easy, but it made the right choices. We’re going to draw a line in the sand and say we’re not going to put any more extra burden on our senior citizens on fixed incomes trying to stay in their homes, our young families trying to stay in their neighborhoods so their kids can stay in that school district, for our farmers, for our small businesses. We said enough is enough on high property taxes. And this bill keeps property taxes in check.”

Three amendments were adopted, including a technical amendment offered by Lenczewski. Rep. John Ward (DFL-Brainerd) successfully repealed a provision that would have allowed cities and counties to use a hotel and lodging tax used to promote tourism to replace losses to state aid.

Members were most vocal over a provision that would tax homeowners who use high amounts of energy during the winter months. Rep. Dave Olin (DFL-Thief River Falls) successfully offered an amendment to exempt residents receiving energy assistance from an extra energy tax.

House Minority Leader Marty Seifert (R-Marshall) said it’s unreasonable to tax heat in a cold state. “The Democrats are so desperate for your tax dollars; they want to tax home heating fuel in the state of Minnesota where it was 20 below zero in January of this year. Unbelievable.”

Also included in the bill is the option for counties to impose a half-cent local option sales tax.

“Instead of raising property taxes because of cuts, we’re giving another option with the local option sales tax,” Marquart said, adding that the sales tax is estimated to raise $100 million to help counties with cuts to local government aid and county program aid.

Agreeing that the bill did propose a lot of reform, Rep. Morrie Lanning (R-Moorhead) still was not keen on the idea of the local option sales tax.

“Those states that have given the local communities the ability to raise taxes are typically the states that don’t give aid to local units of government,” he said. “Those of you who are concerned about local government aid and county program aid, beware because this might be going down a road we don’t want to go down.”

Lenczewski said the bill includes things that the governor has signed in the past.

“All legislators are really stressed out about this deficit. It’s tough,” she said. “I could tell I struck a chord when I mentioned President Reagan. This bill is progressive, it’s not regressive. Yes, parts of it are regressive. But we only have two progressive taxes in Minnesota, the income tax and the estate tax. This is a progressive bill loaded with reform.”