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First Reading: Different paths to the same outcome

Published (5/9/2008)
By Courtney Blanchard
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Rep. Ann Lenczewski, chairwoman of the House Taxes Committee, left, and Rep. Paul Marquart, chairman of the House Property Tax Relief and Local Sales Tax Division, listen to a question during the May 5 debate of the omnibus tax bill. (Photo by Tom Olmscheid)

The leaders of the House Taxes Committee are a display of opposites. Chairwoman Rep. Ann Lenczewski (DFL-Bloomington) stands tall with a sonorous voice, a passion for the minutia of tax policy and a tenacity that resonates from her years as a suburban city council member. The lead Republican, Rep. Dean Simpson (R-Perham), usually sits quietly, several chairs down the committee table from his counterpart. When he speaks, he’s succinct and poignant, and often cites his experience as a rural grocery store owner and mayor. Their leadership style is complementary, despite sometimes antithetical views on tax policy.

For example, the two stand far apart when it comes to using tax incentives to create jobs. Earlier this session, Lenczewski introduced HF4103, a bill to end all state corporate subsidies, many of which were granted with an intention to create jobs.

She says she doesn’t buy it.

“There’s something in our psychology that has happened in Minnesota over the last 10 years that if you’ve created a job, you don’t pay taxes. I just don’t understand that,” Lenczewski said at a March 28 meeting of the House Property Tax Relief and Local Sales Tax Division. “You are a beneficiary of creating that job as well, or else you wouldn’t be doing it.”

Lenczewski describes herself as a “purist” when it comes to business taxation and said she’d rather eliminate every subsidy than choose which ones to keep. Her bill would have freed up money to spend on what she calls government’s core services, like education, health care and infrastructure. To Lenczewski, business subsidies don’t make the cut.

Simpson said he doesn’t buy that.

“To be pure is a wonderful thing, but I guess the things that I see in this whole bill is how is this going to set us apart from other states?” he said at the March 18 meeting of the taxes committee. His view is that the government can form tax policy that creates and retains jobs. That’s necessary when nearby states offer competition in the form of tax incentives, he said.

Rep. Dean Simpson asks a question of House Taxes Committee Chairwoman Rep. Ann Lenczewski during May 5 debate of the omnibus tax bill. (Photo by Tom Olmscheid)“In a perfect world, we wouldn’t have to have job credits or tax credits,” he said. “But we’re not in a perfect world. We have Wisconsin that sits next to us… We have all these players around us that are out there trying to steal our job base and steal our business base.”

Tax bill debate

These views collided as the House passed its omnibus tax bill 80-52 May 5. Sponsored by Lenczewski, HF3149 conspicuously omits an expansion to the governor’s Job Opportunity Building Zones program or a subsidy to fund Phase II of the Mall of America. Such “job-creating” legislation has been touted by members from both parties.

Rep. Torrey Westrom (R-Elbow Lake) introduced, and later withdrew, an amendment that would fund the mall expansion using tax increment financing districts. His plan differs from HF2237, sponsored by Rep. Mike Nelson (DFL-Brooklyn Park), which would exempt the mall from paying into a fiscal disparities pool. That provision is included in the Senate tax bill, and should be negotiated by the conference committee.

Nelson said Westrom’s proposal wouldn’t produce enough money to make the project a reality. Others, like Rep. Bob Gunther (R-Fairmont), said the investment would be worth it if it could plant the seeds to a project expected to create 7,000 construction jobs and lure new tourists to the state.

Lenczewski, who represents the area of Bloomington that includes the mall, remains opposed to the project. She also stood her ground on the JOBZ program when Simpson unsuccessfully tried to tack an expansion of the program onto the bill.

JOBZ came under heavy fire after a report by the nonpartisan Office of the Legislative Auditor found the program to be misused or unnecessary in some cases. Simpson introduced two amendments that included provisions to address the auditor’s critiques. He and other legislators argued that when the program works, it’s worth it.

Rep. Bud Nornes (R-Fergus Falls) said the program has shuffled millions of dollars of investment to his community, created around 80 jobs and attracted a Fortune 500 company to Fergus Falls that originally had its sights on locating in India. “Now with the program either dying, or hopefully expanding, that’ll determine whether we have another chapter of success,” he said.

Now until the end of session

The Senate rejected the House language on May 7 and inserted the language of SF2869, sponsored by Senate Taxes Committee Chairman Sen. Tom Bakk (DFL-Cook). Even before the House refused to concur with the Senate, conferees had met informally to talk about the two bills.

The discussion will now go beyond whether jobs can be created with tax policy. One of the biggest issues to sort out is whether the Senate will agree to the House’s property tax proposal.

It would restructure existing property tax refund programs so that those who pay more than 2 percent of their income toward property taxes would get the most relief. People who make up to $200,000 per year would be eligible.

To address some of the governor’s criticisms that the proposal could hurt more homeowners than it helps, Lenczewski successfully introduced an amendment during the House debate that includes levy limits for local governments, a move pushed for by the governor who favors property tax caps. It also scaled down how far the Market Value Homestead Credit would be reduced to pay for the proposal. The proposal would keep 60 percent of the market value credit intact and eliminate two other programs to restructure the refund system.

During the debate, Simpson said Lenczewski’s amendment took the bill to a better direction, but he voted against it because it didn’t include JOBZ. And even with the changes like levy limits, Revenue Commissioner Ward Einess said at an informal conference committee May 6 that the governor doesn’t support a proposal to scrap the property tax deduction on state income taxes.

The Taxes Conference Committee will work to reach an agreement before the Legislature adjourns for the last time this session, which could be as late as May 19.

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