Minnesota Lawyer
After weeks of cautious moves and infighting among DFL officials, Senate leaders hit the accelerator Thursday, moving to push a $432 million tax cut bill through a committee vote and a full floor vote in a matter of hours. While previously it had been DFL lawmakers holding up the tax repeal process, Republicans took over that role on Thursday, saying they wanted to sleep on the DFL tax package before voting in a Friday morning session.
The proposed cuts were welcomed by House Democrats and Gov. Mark Dayton, both of whom criticized the Senate Republican caucus for another delay. House leaders and the governor had wanted to see federal income tax conformity signed into law by Wednesday of this week, saying that date would give Minnesota filers the chance to take advantage of new deductions offered through the federal code.
Weeks of internal unease for Democrats gave way to partisan attacks after it became clear that Senate Republicans would not vote to suspend the rules, a necessary step to push the bill through on the same day it was approved by the Senate Taxes Committee. House Speaker Paul Thissen accused the Senate GOP of “playing games” over the tax bill, and said passing the cuts was an “urgent” matter. The House’s version of a tax cut bill passed overwhelmingly, 126-2, with the lone “nay” votes coming from a pair of Democrats.
Dayton soon followed suit, arguing in a statement that the Republicans had “inexcusably” failed to approve the rules suspension.
“There is no good reason for Senate Republicans block the bill’s passage today,” Dayton said. “If Republican legislators force any further delays in either the Senate or the House, they will be solely responsible for denying income tax cuts to thousands of Minnesotans.”
In explaining Republicans’ desire to wait one day before voting, Senate Minority Leader David Hann argued that the bill had first appeared in the Senate Taxes Committee on Tuesday, and was not fully vetted.
“We don’t believe that allowing the Senate order to continue as normal — give us a day to read and understand the bill — is inappropriate or unreasonable,” Hann said during the floor session.
Senate Majority Leader Tom Bakk rebutted Hann’s argument, saying the bill had gone through only minor, technical changes during Thursday’s committee hearing, and pointing out that, by law, the Senate needed to act on a bill that had first passed through the House.
“Members, we might not get another tax bill — this might be it,” Bakk warned. He added: “If you want to wait until tomorrow to process it, that’s certainly within your control here today.”
The Senate is scheduled to go back in for a floor session at 9:30 a.m. on Friday.
The Senate’s total reduction of $432 million, arrived at through a combination of federal conformity and a repeal of state business-to-business sales taxes passed in 2013, is a lesser figure than the amounts the House and Dayton have pushed for this session. The House already passed a $500 million tax cut package, while Dayton has sought a $616 million reduction, which amounts to almost exactly half of the projected $1.23 billion budget surplus.
One major difference in the revenue figures comes thanks to the effective date of repeal for the largely unpopular business services taxes. Dayton and the Senate want to cancel those taxes effective April 1, when the warehousing service sales tax is scheduled to go kick in. The House, meanwhile, wants to retroactively cancel the repair service tax on electronic and commercial equipment, which went into effect in July 2013.
Dayton’s proposed tax bill reaches the highest figure thanks partly to his plan to fully repeal the gift tax, another new excise the state began collecting last summer. That tax applies only to Minnesotans who give gifts totaling more than $1 million over the course of their lifetimes to another individual, and was intended to block avoidance of taxes on large sums inherited from the wealthy; Minnesota is one of just two states with a gift tax in force.
The Senate also wants to repeal the gift tax, but would also increase the rate on the top bracket of estate taxes from the current 16 percent to 18 percent, which would be captured from inheritance transfers in excess of $5 million.
