Minnesota Lawyer
House Property and Local Tax Division Chair Jim Davnie, DFL-Minneapolis, argued against an amendment that would trim slightly the renters’ property tax credit and reinstate credit for Minnesotans who claim dependents on their tax returns, saying it was “pitting folks with dependents against renters.” (File photo)
Less than a week after Gov. Mark Dayton signed a major tax cut package into law, another relief bill began advancing in the Legislature courtesy of House Democrats. The House Taxes Committee approved a second tax-cut bill Thursday night, sending the chamber’s second omnibus tax bill to the House Ways and Means Committee, the final step before a floor vote.
The bill would cut some $45 million in state revenue during the current budget cycle, with most of that money being remitted to homeowners, renters and farmers in the form of property tax aids and credits. Those provisions were crafted in the House Property and Local Tax Division, chaired by Rep. Jim Davnie, DFL-Minneapolis, who explained on Wednesday that the breaks were a useful step in the DFL’s efforts at providing property tax relief.
“The division report … shows the continuing commitment by this majority to reducing property taxes for middle-class Minnesotans and supporting small businesses,” Davnie said.
As with earlier tax cuts pushed this session, the bill found favor with both Democrats and Republicans, and passed easily on a voice vote following testimony and some debate. The key differences, if any are to occur, would come between the House and Senate, where DFL leadership has yet to unveil a second tax-relief package for this session.
Farm credit applauded
The one-time aids and credits for homeowners and renters would result in more than $24 million in property tax reductions. Farmers, meanwhile, are set to benefit from a one-year aid program worth about $19 million for the state’s bottom line.
Minnesota Farmers Union lobbyist Thom Peterson was pleased to see the property tax aid for farmers, who would be eligible for a one-time credit of up to $230 during the 2015 fiscal year. Based on his conversations with Senate Democrats, Peterson says he is confident that a similar amount of relief would likewise prevail in the upper chamber, though he said leaders there might land on a different formula.
During committee discussion, Rep. Pat Garofalo, R-Farmington, characterized the tax breaks as the “re-elect Paul Marquart” provision, a joking reference to the chief DFL proponent of the farmland credits. Peterson, meanwhile, argued that the relief is necessary in light of a recent property tax spike owing to rising commodity prices, which have since fallen.
“We have a state surplus,” Petersen said. “We have some money. If we can do something, it’s helpful.”
The bill would also put in law an agricultural homestead credit for future years, with about $30 million in property tax breaks available during the 2016-17 budget cycle.
Another element of the bill would modify the state’s handling of accelerated sales tax payments made by vendors of alcohol and tobacco. Under current law, businesses with more than $120,000 worth of liabilities to the state must pay 90 percent of their June tax liabilities by the end of that month, which helps balance the state budget’s bottom line in the final days before the end of a fiscal year.
This year, that late boost is less necessary thanks to the projected budget surplus. The House bill would raise the threshold requirement for those accelerated payments to $250,000 in liabilities, and reduce the amount owed to 82 percent of sales taxes; the remainder would be due in August.
The package that passed out of House Taxes on Thursday also includes a number of carve-out measures for economic development at the local level. One such measure would let the city of Duluth collect up to $18 million through an increase in food, beverage and hotel sales taxes, with those revenues dedicated to capital investment projects that are geared toward tourism and recreation on the city’s west side. Another piece of the bill would give the city of Albert Lea an additional five years’ authorization to assess a local sales tax.
Some broader aspects of the House plan are aimed at helping local units of government throughout the state, including a provision to broaden a local government sales tax exemption to joint powers agreements. League of Minnesota Cities lobbyist Gary Carlson said local governments are pleased that the House wants to expand the tax break, but said his organization wants to see that exemption go into effect during the next fiscal year, if not retroactively applied to tax collections dating back to July 2013.
“That’s something we’re hoping to address,” Carlson said prior to Thursday’s hearing, pointing out that Dayton supports an earlier start for the exemption.
Back-dating the tax break would put the House plan outside of the committee’s agreed target, Carlson said, meaning other cuts or revenue shifts would be necessary. The exemption would cost the state about $7.5 million in annual revenue.
Bill amended
A handful of amendments to the tax package were offered during Thursday’s hearing. Rep. Greg Davids, R-Preston, successfully brought an amendment that would allow bars and restaurants to continue buying and selling liquor in spite of delinquency on past sales taxes. If passed, Davids’ amendment would allow businesses that have entered into a payment agreement with the Department of Revenue to resume selling liquor.
“We want to try and get them so they can keep their business going, and keep their twenty or thirty employees going,” he said.
Rep. Jenifer Loon, R-Eden Prairie, offered an amendment to trim slightly the renters’ property tax credit and reinstate credit for Minnesotans who claim dependents on their tax returns. Loon pointed out that the proposal passed on a voice vote on the House floor, but did not appear in the version sent back by the Senate.
Davnie argued against the amendment, saying it was “pitting folks with dependents against renters,” adding that it was becoming increasingly difficult for renters to make ends meet.
Chair Rep. Ann Lenczewski, DFL-Bloomington, credited Loon with finding a “very creative” idea, but said she wouldn’t support the amendment, arguing that the Department of Revenue had already begun adjusting tax forms in light of the federal income tax conformity measures passed earlier this session.
“We’ve finally got the folks off to the races in adjusting the software,” Lenczewsi said. “I think that [amendment] sort of resets the table all of a sudden.”
