Republican House passes tax bill

By T.W. Budig, ECM Capitol Reporter

The House Republicans passed their tax bill Wednesday, March 21, one promising a 12-year phase-out of the commercial/industrial business property tax and containing other provisions deemed pro job-growth by Republicans.

“You’ll never feel bad for doing the right thing,” said House Tax Committee Chairman Greg Davids, R-Preston, of voting for his bill.

But Democrats style the bill, which in part funds its tax cuts through reductions in the renter tax credit, as breathtaking in its devotion to the wealthy.

“It’s just a way to get votes and make a political statement,” said Rep. Ann Lenczewski, DFL-Bloomington, of the bill.

“There is not $1.6 billion lying around,” she said of paying for the business property tax cuts long-term.

But Davids indicated he believes growth in the state’s economy will cover future tax shortfalls.

Besides slamming the bill for failing to undo the homestead tax credit elimination, Democrats focused much of their criticism on the rent credit cut.

The proposed reduction in rent considered property taxes from 17 percent to 15 percent would mean an average loss of $103 per year for seniors, argued Democrats.

Under the bill, the maximum household income eligible for a rent credit refund for nonsenior/nondisabled renters would be lowered from $54,619 under current law to $25,000 — the reduction is less for disabled renters.

Tens of thousands of renters would completely lose their renter credit under the tax bill, said Lenczewski.

But Davids counters by saying many states provide no rent credit at all, and Minnesota’s is “generous,” he said, speaking off the House floor today.

Democrats question the effectiveness of the proposed commercial/industrial property tax cut in terms of creating jobs.

Even if hiring would take place, there’s no way of knowing it, explained Lenczewski.

There are no reporting provisions in the bills, she said.

Lenczewski views Democratic Gov. Mark Dayton’s job creation tax credit proposal superior to the House Republican’s.

“Because you have to create a job to get the dough,” she said.

Dayton is proposing a $3,000 tax credit for each unemployed Minnesota military veteran or recent graduate hired by a state business this year, a credit proposed to extend into the first six months of 2013 at the reduce rate of $1,500.

He looks to closing perceived state tax loopholes for corporations with offshore assets as a means of funding his $35 million tax credit initiative.

Davids views the Dayton’s proposal as ineffectual.

But Davids also indicated Wednesday, he doubts Dayton would accept the House Republican tax bill.

“As it is, he probably wouldn’t,” said Davids, speaking off the House floor.

But Davids stressed a willingness to work with the governor.

There are good things in the tax bill, he said.

In addition to the 12-year phase out of commercial/industrial scheduled to begin in 2014, the bill provides increased funding for the “angel” investment tax credit with an emphasis on Greater Minnesota.

It increases the research and development tax credit by $25 million.

In a provision Democrats find maddening, qualifying Biotechnology companies under the bill would be allowed to sell their net operating losses to other companies which, in turn, could use to obtain tax breaks.

“Where are the capitalists?” asked Lenczewski on the House floor, portraying the last provision as Republicans meddling in the free market.

Other provisions in the bill include the refund of an existing sales tax paid on capital equipment as an upfront exemption for small businesses, and an increase in the amount of production a qualified brewer may have, from 100,000 barrels per year to 250,000 barrels per year, in determining eligibility for a tax credit.

The bill would allow the City of Woodbury to issue general obligation bonds to upgrade and expand the Bielenberg Sports Center without voter referendum. It would allow the Dakota County Community Development Agency to establish a TIF district in the city of West St. Paul.

It would also provide the city of Apple Valley with an exclusion from general law tax increment financing rules to help develop about 600 acres containing sand and gravel pits.

Yet another provision would exclude from state sales tax the sale of lodging and taxable food and beverages between an established religious order and an affiliated higher education institution.

“Instead of tearing at them, and insulting them, and demonizing them, let’s just say ‘Thanks,’” said Rep. Keith Downey, R-Edina, of business.

Downey expressed chagrin for a perceived coldness Democrats have shown towards business on the House floor.

Rep. Jenifer Loon, R-Eden Prairie, said many of the provisions in the tax bill are targeted towards small business.

“We want high tech jobs in our state,” she said.

Rep. Sarah Anderson, R-Plymouth, gave the Republican tax bill a verbal thumbs up.

“I tell you folks, I can’t be prouder of this bill as I am right now,” she said.

Democrats felt differently.

Rep. Kate Knuth, DFL-New Brighton, warned of the tax bill threatening “people on the (financial) edge.”

Lenczewski, in an exchange with Downey, said along with thanking business he should thank renters for footing the cost of the tax bill.

Davids argued his tax bill was sound.

“Members, this is a good bill, an awesome bill,” he said before seeing it pass the House on a 72 to 62 vote.

The Republican Senate has yet to take its tax bill to the Senate floor.