Please ensure Javascript is enabled for purposes of website accessibility
Recent News
Home / Budget / Taxes / Dems say yes to tax cuts — except in Senate
11-1241 Anderson v. Product Fabricators, Inc., appealed from District of Minnesota, Benton, J.

Dems say yes to tax cuts — except in Senate

Rep. Ann Lenczewski, DFL-Bloomington, chair of the House Taxes Committee, is among the key figures in the House who have expressed interest in bringing Minnesota’s tax system in line with the federal IRS code. (File photo)

Rep. Ann Lenczewski, DFL-Bloomington, chair of the House Taxes Committee, is among the key figures in the House who have expressed interest in bringing Minnesota’s tax system in line with the federal IRS code. (File photo)

The Senate took a first pass at staking out its legislative priorities for the 2014 session on Monday when the first batch of bill introductions from the upper chamber were entered for the record. Coupled with pre-filed House bills released in January, it underscores the appetite in both houses of the Legislature for the repeal of the business-to-business sales taxes passed last year.

Key figures in the House have also expressed interest in bringing Minnesota’s tax system in line with the federal IRS code, including Rep. Ann Lenczewski, DFL-Bloomington, chair of the House Taxes Committee. Lenczewski’s committee held an initial hearing on Tuesday afternoon to review a number of bills for tax repeals, as well as legislation for full federal conformity — which, in her view, would amount to a tax cut for middle-class Minnesotans.

Gov. Mark Dayton has also expressed support for striking all three of the new business-to-business sales taxes and moving to conform with the IRS code, moves that would cost the state’s general fund $230 million and $200 million, respectively, in revenue this biennium.

The idea of repealing business-to-business taxes has yet to gain favor with Senate Democratic leaders, but the authors of several such bills include a number of moderate DFL freshmen. Sen. Vicki Jensen, DFL-Owatonna, predicted that it would not be easy to convince the Senate Democratic caucus to agree on the topic.

“They’re more resistant,” Jensen said of her caucus members. “I think the House is more open to it. I think it’ll be an uphill climb, but it’s worth the fight – it’s worth having the conversation, let’s put it that way.”

Testimony targets B2B taxes

Tuesday’s House hearing saw testifiers from a number of business-minded advocacy groups argue in favor of peeling back the new levies on warehousing, business equipment repair and the purchase of telecommunications equipment. Also inveighing against those new taxes were suburban DFL Reps. Laurie Halverson of Eagan and Jason Isaacson of Shoreview, who said business owners in his district had been “very vocal” in insisting that the new warehousing tax would hurt their bottom line.

“I don’t think [the tax] will be necessary to our fiscal health,” Isaacson told committee members.

Kathy Forester, general manager of Strategic Warehousing and a constituent of Halverson’s, testified that her biggest client moved its goods to a new warehousing operation in Iowa, and told the committee that she had already been forced to lay off 18 percent of her workforce due to lost business.

The impact of the warehousing tax is prospective at this point, as it does not take effect until April 1. Committee member Rep. Marion O’Neill, R-Buffalo, urged its repeal before that date, saying the Legislature should stop the tax before it hits businesses.

“If it’s enacted and repealed after the fact, that’s a huge cost to business,” she said.

Rep. Greg Davids, R-Preston, was one of several Republicans to applaud the Democrats for their renewed interest in federal conformity and the repeal of business taxes, saying he would like to see the two issues paired together in a single bill. Davids implied that he would settle for a bill that stopped short of full conformity, so long as the changes made were “substantial.”

Senate majority is divided

For her part, Senate Tax Reform Division Chair Ann Rest is decidedly less interested in bringing Minnesota into lock-step with exemptions and tax breaks granted by the IRS. Rest entered one bill of her own earlier this week that would change Minnesota’s “working family credit” to mirror the federal earned income tax credit; if passed, that proposal would raise the income ceiling for working couples to claim a tax credit.

As for other aspects of conformity, Rest said the state typically opts to set its own course on taxes.

“Some of them we probably will not conform to,” Rest said, “because Minnesota, historically, has not accepted the federal policies as good tax policy.”

In opposing last year’s business taxes, Jensen is joined by Sens. Matt Schmit, DFL-Red Wing, and Melisa Franzen, DFL-Edina, who said she had never favored those new taxes, which, by her account, caused her to vote against the omnibus tax bill last year.

“I think there was some of that sense last session,” Franzen said, “when we had CEOs coming to talk to our leaders because of all the business-to-business sales taxes that were on the table.”

Asked about the possibility of some moderate Democrats banding together with Republicans to repeal the new taxes, Franzen claimed that she did not view the issue in partisan terms.

“I don’t see it as a calculation of voting with the Republicans or with the Democrats,” she said. “I vote what I think my district wants me to do.”

The differences between the House and Senate tax leaders seem to include a divide in both substance and process. As her committee took up a stack of repeal bills during Tuesday’s hearing, Lenczewski commented that she would like to see “early action” along those lines, though she did not specify a timetable.

Rest, meanwhile, said her tax reform committee would hold a meeting on Thursday to hear from stakeholders from the various business sectors affected by the taxes, but does not plan to hear bills reflecting their aims in committee any time soon. Rest said her disposition toward repealing the “base-broadening” business-to-business taxes could depend on the February economic forecast, but was not committed to their repeal even if the budget outlook is “very favorable,” as she expects.

“We’re trying to be cautious, and that includes before the forecast, as well as after the forecast,” Rest said.

About Mike Mullen

Leave a Reply